Article 1785 - Duration of Partnership

1.

G.R. No. 109248. July 3, 1995.*

GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO, petitioners, vs. HON. COURT OF
APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA, respondents.

VITUG, J.:

The instant petition seeks a review of the decision rendered by the Court of Appeals, dated 26 February 1993, in CA-G.R. SP No.
24638 and No. 24648 affirming in toto that of the Securities and Exchange Commission ("SEC") in SEC AC 254.

The antecedents of the controversy, summarized by respondent Commission and quoted at length by the appellate court in its
decision, are hereunder restated.

The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry on 4
January 1937 and reconstituted with the Securities and Exchange Commission on 4 August 1948. The SEC records show
that there were several subsequent amendments to the articles of partnership on 18 September 1958, to change the firm
[name] to ROSS, SELPH and CARRASCOSO; on 6 July 1965 . . . to ROSS, SELPH, SALCEDO, DEL ROSARIO, BITO &
MISA; on 18 April 1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on 4 December 1972 to SALCEDO, DEL
ROSARIO, BITO, MISA & LOZADA; on 11 March 1977 to DEL ROSARIO, BITO, MISA & LOZADA; on 7 June 1977 to
BITO, MISA & LOZADA; on 19 December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and Mariano M. Lozada
associated themselves together, as senior partners with respondents-appellees Gregorio F. Ortega, Tomas O. del Castillo,
Jr., and Benjamin Bacorro, as junior partners.

On February 17, 1988, petitioner-appellant wrote the respondents-appellees a letter stating:

I am withdrawing and retiring from the firm of Bito, Misa and Lozada, effective at the end of this month.

"I trust that the accountants will be instructed to make the proper liquidation of my participation in the
firm."

On the same day, petitioner-appellant wrote respondents-appellees another letter stating:

"Further to my letter to you today, I would like to have a meeting with all of you with regard to the
mechanics of liquidation, and more particularly, my interest in the two floors of this building. I would like
to have this resolved soon because it has to do with my own plans."

On 19 February 1988, petitioner-appellant wrote respondents-appellees another letter stating:

"The partnership has ceased to be mutually satisfactory because of the working conditions of our
employees including the assistant attorneys. All my efforts to ameliorate the below subsistence level of
the pay scale of our employees have been thwarted by the other partners. Not only have they refused
to give meaningful increases to the employees, even attorneys, are dressed down publicly in a loud
voice in a manner that deprived them of their self-respect. The result of such policies is the formation
of the union, including the assistant attorneys."

On 30 June 1988, petitioner filed with this Commission's Securities Investigation and Clearing Department (SICD) a petition
for dissolution and liquidation of partnership, docketed as SEC Case No. 3384 praying that the Commission:

"1. Decree the formal dissolution and order the immediate liquidation of (the partnership of) Bito, Misa
& Lozada;

"2. Order the respondents to deliver or pay for petitioner's share in the partnership assets plus the
profits, rent or interest attributable to the use of his right in the assets of the dissolved partnership;

"3. Enjoin respondents from using the firm name of Bito, Misa & Lozada in any of their correspondence,
checks and pleadings and to pay petitioners damages for the use thereof despite the dissolution of the
partnership in the amount of at least P50,000.00;
 "4. Order respondents jointly and severally to pay petitioner attorney's fees and expense of litigation in
such amounts as maybe proven during the trial and which the Commission may deem just and equitable
under the premises but in no case less than ten (10%) per cent of the value of the shares of petitioner
or P100,000.00;

"5. Order the respondents to pay petitioner moral damages with the amount of P500,000.00 and
exemplary damages in the amount of P200,000.00.

"Petitioner likewise prayed for such other and further reliefs that the Commission may deem just and
equitable under the premises."

On 13 July 1988, respondents-appellees filed their opposition to the petition.

On 13 July 1988, petitioner filed his Reply to the Opposition.

On 31 March 1989, the hearing officer rendered a decision ruling that:

"[P]etitioner's withdrawal from the law firm Bito, Misa & Lozada did not dissolve the said law partnership.
Accordingly, the petitioner and respondents are hereby enjoined to abide by the provisions of the
Agreement relative to the matter governing the liquidation of the shares of any retiring or withdrawing
partner in the partnership interest."1

On appeal, the SEC en banc reversed the decision of the Hearing Officer and held that the withdrawal of Attorney Joaquin L. Misa
had dissolved the partnership of "Bito, Misa & Lozada." The Commission ruled that, being a partnership at will, the law firm could be
dissolved by any partner at anytime, such as by his withdrawal therefrom, regardless of good faith or bad faith, since no partner can
be forced to continue in the partnership against his will. In its decision, dated 17 January 1990, the SEC held:

WHEREFORE, premises considered the appealed order of 31 March 1989 is hereby REVERSED insofar as it concludes
that the partnership of Bito, Misa & Lozada has not been dissolved. The case is hereby REMANDED to the Hearing Officer
for determination of the respective rights and obligations of the parties. 2

The parties sought a reconsideration of the above decision. Attorney Misa, in addition, asked for an appointment of a receiver to take
over the assets of the dissolved partnership and to take charge of the winding up of its affairs. On 4 April 1991, respondent SEC
issued an order denying reconsideration, as well as rejecting the petition for receivership, and reiterating the remand of the case to
the Hearing Officer.

The parties filed with the appellate court separate appeals (docketed CA-G.R. SP No. 24638 and CA-G.R. SP No. 24648).

During the pendency of the case with the Court of Appeals, Attorney Jesus Bito and Attorney Mariano Lozada both died on,
respectively, 05 September 1991 and 21 December 1991. The death of the two partners, as well as the admission of new partners,
in the law firm prompted Attorney Misa to renew his application for receivership (in CA G.R. SP No. 24648). He expressed concern
over the need to preserve and care for the partnership assets. The other partners opposed the prayer.

The Court of Appeals, finding no reversible error on the part of respondent Commission, AFFIRMED in toto the SEC decision and
order appealed from. In fine, the appellate court held, per its decision of 26 February 1993, (a) that Atty. Misa's withdrawal from the
partnership had changed the relation of the parties and inevitably caused the dissolution of the partnership; (b) that such withdrawal
was not in bad faith; (c) that the liquidation should be to the extent of Attorney Misa's interest or participation in the partnership which
could be computed and paid in the manner stipulated in the partnership agreement; (d) that the case should be remanded to the SEC
Hearing Officer for the corresponding determination of the value of Attorney Misa's share in the partnership assets; and (e) that the
appointment of a receiver was unnecessary as no sufficient proof had been shown to indicate that the partnership assets were in any
such danger of being lost, removed or materially impaired.

In this petition for review under Rule 45 of the Rules of Court, petitioners confine themselves to the following issues:

1. Whether or not the Court of Appeals has erred in holding that the partnership of Bito, Misa & Lozada (now Bito, Lozada,
Ortega & Castillo) is a partnership at will;

2. Whether or not the Court of Appeals has erred in holding that the withdrawal of private respondent dissolved the
partnership regardless of his good or bad faith; and

3. Whether or not the Court of Appeals has erred in holding that private respondent's demand for the dissolution of the
partnership so that he can get a physical partition of partnership was not made in bad faith;
to which matters we shall, accordingly, likewise limit ourselves.

A partnership that does not fix its term is a partnership at will. That the law firm "Bito, Misa & Lozada," and now "Bito, Lozada, Ortega
and Castillo," is indeed such a partnership need not be unduly belabored. We quote, with approval, like did the appellate court, the
findings and disquisition of respondent SEC on this matter; viz:

The partnership agreement (amended articles of 19 August 1948) does not provide for a specified period or undertaking.
The "DURATION" clause simply states:

"5. DURATION. The partnership shall continue so long as mutually satisfactory and upon the death or
legal incapacity of one of the partners, shall be continued by the surviving partners."

The hearing officer however opined that the partnership is one for a specific undertaking and hence not a partnership at
will, citing paragraph 2 of the Amended Articles of Partnership (19 August 1948):

"2. Purpose. The purpose for which the partnership is formed, is to act as legal adviser and
representative of any individual, firm and corporation engaged in commercial, industrial or other lawful
businesses and occupations; to counsel and advise such persons and entities with respect to their legal
and other affairs; and to appear for and represent their principals and client in all courts of justice and
government departments and offices in the Philippines, and elsewhere when legally authorized to do
so."

The "purpose" of the partnership is not the specific undertaking referred to in the law. Otherwise, all partnerships, which
necessarily must have a purpose, would all be considered as partnerships for a definite undertaking. There would therefore
be no need to provide for articles on partnership at will as none would so exist. Apparently what the law contemplates, is a
specific undertaking or "project" which has a definite or definable period of completion.3

The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The right to choose with whom
a person wishes to associate himself is the very foundation and essence of that partnership. Its continued existence is, in turn,
dependent on the constancy of that mutual resolve, along with each partner's capability to give it, and the absence of a cause for
dissolution provided by the law itself. Verily, any one of the partners may, at his sole pleasure, dictate a dissolution of the partnership
at will. He must, however, act in good faith, not that the attendance of bad faith can prevent the dissolution of the partnership4 but that
it can result in a liability for damages.5

In passing, neither would the presence of a period for its specific duration or the statement of a particular purpose for its creation
prevent the dissolution of any partnership by an act or will of a partner. 6 Among partners,7 mutual agency arises and the doctrine
of delectus personae allows them to have the power, although not necessarily theright, to dissolve the partnership. An unjustified
dissolution by the partner can subject him to a possible action for damages.

The dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing to be associated in the
carrying on, as might be distinguished from the winding up of, the business. 8 Upon its dissolution, the partnership continues and its
legal personality is retained until the complete winding up of its business culminating in its termination. 9

The liquidation of the assets of the partnership following its dissolution is governed by various provisions of the Civil Code; 10 however,
an agreement of the partners, like any other contract, is binding among them and normally takes precedence to the extent applicable
over the Code's general provisions. We here take note of paragraph 8 of the "Amendment to Articles of Partnership" reading thusly:

. . . In the event of the death or retirement of any partner, his interest in the partnership shall be liquidated and paid in
accordance with the existing agreements and his partnership participation shall revert to the Senior Partners for allocation
as the Senior Partners may determine; provided, however, that with respect to the two (2) floors of office condominium
which the partnership is now acquiring, consisting of the 5th and the 6th floors of the Alpap Building, 140 Alfaro Street,
Salcedo Village, Makati, Metro Manila, their true value at the time of such death or retirement shall be determined by two
(2) independent appraisers, one to be appointed (by the partnership and the other by the) retiring partner or the heirs of a
deceased partner, as the case may be. In the event of any disagreement between the said appraisers a third appraiser will
be appointed by them whose decision shall be final. The share of the retiring or deceased partner in the aforementioned
two (2) floor office condominium shall be determined upon the basis of the valuation above mentioned which shall be paid
monthly within the first ten (10) days of every month in installments of not less than P20,000.00 for the Senior Partners,
P10,000.00 in the case of two (2) existing Junior Partners and P5,000.00 in the case of the new Junior Partner. 11

The term "retirement" must have been used in the articles, as we so hold, in a generic sense to mean the dissociation by a partner,
inclusive of resignation or withdrawal, from the partnership that thereby dissolves it.
On the third and final issue, we accord due respect to the appellate court and respondent Commission on their common factual
finding, i.e., that Attorney Misa did not act in bad faith. Public respondents viewed his withdrawal to have been spurred by
"interpersonal conflict" among the partners. It would not be right, we agree, to let any of the partners remain in the partnership under
such an atmosphere of animosity; certainly, not against their will. 12 Indeed, for as long as the reason for withdrawal of a partner is not
contrary to the dictates of justice and fairness, nor for the purpose of unduly visiting harm and damage upon the partnership, bad
faith cannot be said to characterize the act. Bad faith, in the context here used, is no different from its normal concept of a conscious
and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.

WHEREFORE, the decision appealed from is AFFIRMED. No pronouncement on costs.

SO ORDERED.

Article 1786 - Obligations of a Partner with respect to Contribution of Property

1.

No. L-59956. October 31, 1984.*

ISABELO MORAN, JR., petitioner, vs. THE HON. COURT OF APPEALS and MARIANO E. PECSON, respondents.

GUTIERREZ, JR., J.:ñé+.£ªwph!1

This is a petition for review on certiorari of the decision of the respondent Court of Appeals which ordered petitioner Isabelo Moran,
Jr. to pay damages to respondent Mariano E, Pecson.

As found by the respondent Court of Appeals, the undisputed facts indicate that: têñ.£îhqwâ£

xxx xxx xxx

... on February 22, 1971 Pecson and Moran entered into an agreement whereby both would contribute P15,000
each for the purpose of printing 95,000 posters (featuring the delegates to the 1971 Constitutional Convention),
with Moran actually supervising the work; that Pecson would receive a commission of P l,000 a month starting on
April 15, 1971 up to December 15, 1971; that on December 15, 1971, a liquidation of the accounts in the
distribution and printing of the 95,000 posters would be made, that Pecson gave Moran P10,000 for which the
latter issued a receipt; that only a few posters were printed; that on or about May 28, 1971, Moran executed in
favor of Pecson a promissory note in the amount of P20,000 payable in two equal installments (P10,000 payable
on or before June 15, 1971 and P10,000 payable on or before June 30, 1971), the whole sum becoming due
upon default in the payment of the first installment on the date due, complete with the costs of collection.

Private respondent Pecson filed with the Court of First Instance of Manila an action for the recovery of a sum of money and alleged
in his complaint three (3) causes of action, namely: (1) on the alleged partnership agreement, the return of his contribution of
P10,000.00, payment of his share in the profits that the partnership would have earned, and, payment of unpaid commission; (2) on
the alleged promissory note, payment of the sum of P20,000.00; and, (3) moral and exemplary damages and attorney's fees.

After the trial, the Court of First Instance held that: têñ.£îhqwâ£

From the evidence presented it is clear in the mind of the court that by virtue of the partnership agreement entered
into by the parties-plaintiff and defendant the plaintiff did contribute P10,000.00, and another sum of P7,000.00
for the Voice of the Veteran or Delegate Magazine. Of the expected 95,000 copies of the posters, the defendant
was able to print 2,000 copies only authorized of which, however, were sold at P5.00 each. Nothing more was
done after this and it can be said that the venture did not really get off the ground. On the other hand, the plaintiff
failed to give his full contribution of P15,000.00. Thus, each party is entitled to rescind the contract which right is
implied in reciprocal obligations under Article 1385 of the Civil Code whereunder 'rescission creates the obligation
to return the things which were the object of the contract ...

WHEREFORE, the court hereby renders judgment ordering defendant Isabelo C. Moran, Jr. to return to plaintiff
Mariano E. Pecson the sum of P17,000.00, with interest at the legal rate from the filing of the complaint on June
19, 1972, and the costs of the suit.
 For insufficiency of evidence, the counterclaim is hereby dismissed.

From this decision, both parties appealed to the respondent Court of Appeals. The latter likewise rendered a decision against the
petitioner. The dispositive portion of the decision reads: têñ.£îhqwâ£

PREMISES CONSIDERED, the decision appealed from is hereby SET ASIDE, and a new one is hereby rendered,
ordering defendant-appellant Isabelo C. Moran, Jr. to pay plaintiff- appellant Mariano E. Pecson:

(a) Forty-seven thousand five hundred (P47,500) (the amount that could have accrued to Pecson under their
agreement);

(b) Eight thousand (P8,000), (the commission for eight months);

(c) Seven thousand (P7,000) (as a return of Pecson's investment for the Veteran's Project);

(d) Legal interest on (a), (b) and (c) from the date the complaint was filed (up to the time payment is made)

The petitioner contends that the respondent Court of Appeals decided questions of substance in a way not in accord with law and with
Supreme Court decisions when it committed the following errors:

I THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING PETITIONER ISABELO C. MORAN, JR. LIABLE
TO RESPONDENT MARIANO E. PECSON IN THE SUM OF P47,500 AS THE SUPPOSED EXPECTED PROFITS DUE HIM.

II THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING PETITIONER ISABELO C. MORAN, JR. LIABLE
TO RESPONDENT MARIANO E. PECSON IN THE SUM OF P8,000, AS SUPPOSED COMMISSION IN THE PARTNERSHIP
ARISING OUT OF PECSON'S INVESTMENT.

III THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING PETITIONER ISABELO C. MORAN, JR. LIABLE
TO RESPONDENT MARIANO E. PECSON IN THE SUM OF P7,000 AS A SUPPOSED RETURN OF INVESTMENT IN A MAGAZINE
VENTURE.

IV ASSUMING WITHOUT ADMITTING THAT PETITIONER IS AT ALL LIABLE FOR ANY AMOUNT, THE HONORABLE COURT OF
APPEALS DID NOT EVEN OFFSET PAYMENTS ADMITTEDLY RECEIVED BY PECSON FROM MORAN.

V THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT GRANTING THE PETITIONER'S COMPULSORY
COUNTERCLAIM FOR DAMAGES.

The first question raised in this petition refers to the award of P47,500.00 as the private respondent's share in the unrealized profits
of the partnership. The petitioner contends that the award is highly speculative. The petitioner maintains that the respondent court did
not take into account the great risks involved in the business undertaking.

We agree with the petitioner that the award of speculative damages has no basis in fact and law.

There is no dispute over the nature of the agreement between the petitioner and the private respondent. It is a contract of partnership.
The latter in his complaint alleged that he was induced by the petitioner to enter into a partnership with him under the following terms
and conditions: têñ.£îhqwâ£

1. That the partnership will print colored posters of the delegates to the Constitutional Convention;
2. That they will invest the amount of Fifteen Thousand Pesos (P15,000.00) each;
3. That they will print Ninety Five Thousand (95,000) copies of the said posters;
4. That plaintiff will receive a commission of One Thousand Pesos (P1,000.00) a month starting April 15, 1971 up
to December 15, 1971;
5. That upon the termination of the partnership on December 15, 1971, a liquidation of the account pertaining to
the distribution and printing of the said 95,000 posters shall be made.

The petitioner on the other hand admitted in his answer the existence of the partnership.

The rule is, when a partner who has undertaken to contribute a sum of money fails to do so, he becomes a debtor of the partnership
for whatever he may have promised to contribute (Art. 1786, Civil Code) and for interests and damages from the time he should have
complied with his obligation (Art. 1788, Civil Code). Thus in Uy v. Puzon (79 SCRA 598), which interpreted Art. 2200 of the Civil Code
of the Philippines, we allowed a total of P200,000.00 compensatory damages in favor of the appellee because the appellant therein
was remiss in his obligations as a partner and as prime contractor of the construction projects in question. This case was decided on
a particular set of facts. We awarded compensatory damages in the Uy case because there was a finding that the constructing
business is a profitable one and that the UP construction company derived some profits from its contractors in the construction of
roads and bridges despite its deficient capital." Besides, there was evidence to show that the partnership made some profits during
the periods from July 2, 1956 to December 31, 1957 and from January 1, 1958 up to September 30, 1959. The profits on two
government contracts worth P2,327,335.76 were not speculative. In the instant case, there is no evidence whatsoever that the
partnership between the petitioner and the private respondent would have been a profitable venture. In fact, it was a failure doomed
from the start. There is therefore no basis for the award of speculative damages in favor of the private respondent.

Furthermore, in the Uy case, only Puzon failed to give his full contribution while Uy contributed much more than what was expected
of him. In this case, however, there was mutual breach. Private respondent failed to give his entire contribution in the amount of
P15,000.00. He contributed only P10,000.00. The petitioner likewise failed to give any of the amount expected of him. He further failed
to comply with the agreement to print 95,000 copies of the posters. Instead, he printed only 2,000 copies.

Article 1797 of the Civil Code provides: têñ.£îhqwâ£

The losses and profits shall be distributed in conformity with the agreement. If only the share of each partner in
the profits has been agreed upon, the share of each in the losses shall be in the same proportion.

Being a contract of partnership, each partner must share in the profits and losses of the venture. That is the essence of a partnership.
And even with an assurance made by one of the partners that they would earn a huge amount of profits, in the absence of fraud, the
other partner cannot claim a right to recover the highly speculative profits. It is a rare business venture guaranteed to give 100%
profits. In this case, on an investment of P15,000.00, the respondent was supposed to earn a guaranteed P1,000.00 a month for eight
months and around P142,500.00 on 95,000 posters costing P2.00 each but 2,000 of which were sold at P5.00 each. The fantastic
nature of expected profits is obvious. We have to take various factors into account. The failure of the Commission on Elections to
proclaim all the 320 candidates of the Constitutional Convention on time was a major factor. The petitioner undesirable his best
business judgment and felt that it would be a losing venture to go on with the printing of the agreed 95,000 copies of the posters.
Hidden risks in any business venture have to be considered.

It does not follow however that the private respondent is not entitled to recover any amount from the petitioner. The records show that
the private respondent gave P10,000.00 to the petitioner. The latter used this amount for the printing of 2,000 posters at a cost of
P2.00 per poster or a total printing cost of P4,000.00. The records further show that the 2,000 copies were sold at P5.00 each. The
gross income therefore was P10,000.00. Deducting the printing costs of P4,000.00 from the gross income of P10,000.00 and with no
evidence on the cost of distribution, the net profits amount to only P6,000.00. This net profit of P6,000.00 should be divided between
the petitioner and the private respondent. And since only P4,000.00 was undesirable by the petitioner in printing the 2,000 copies, the
remaining P6,000.00 should therefore be returned to the private respondent.

Relative to the second alleged error, the petitioner submits that the award of P8,000.00 as Pecson's supposed commission has no
justifiable basis in law.

Again, we agree with the petitioner.

The partnership agreement stipulated that the petitioner would give the private respondent a monthly commission of Pl,000.00 from
April 15, 1971 to December 15, 1971 for a total of eight (8) monthly commissions. The agreement does not state the basis of the
commission. The payment of the commission could only have been predicated on relatively extravagant profits. The parties could not
have intended the giving of a commission inspite of loss or failure of the venture. Since the venture was a failure, the private respondent
is not entitled to the P8,000.00 commission.

Anent the third assigned error, the petitioner maintains that the respondent Court of Appeals erred in holding him liable to the private
respondent in the sum of P7,000.00 as a supposed return of investment in a magazine venture.

In awarding P7,000.00 to the private respondent as his supposed return of investment in the "Voice of the Veterans" magazine venture,
the respondent court ruled that: têñ.£îhqwâ£

xxx xxx xxx

... Moran admittedly signed the promissory note of P20,000 in favor of Pecson. Moran does not question the due
execution of said note. Must Moran therefore pay the amount of P20,000? The evidence indicates that the
P20,000 was assigned by Moran to cover the following: têñ.£îhqwâ£

(a) P 7,000 — the amount of the PNB check given by Pecson to Moran
representing Pecson's investment in Moran's other project (the
publication and printing of the 'Voice of the Veterans');
 (b) P10,000 — to cover the return of Pecson's contribution in the project
of the Posters;

(c) P3,000 — representing Pecson's commission for three months (April,

May, June, 1971).

Of said P20,000 Moran has to pay P7,000 (as a return of Pecson's investment for the Veterans' project, for this
project never left the ground) ...

As a rule, the findings of facts of the Court of Appeals are final and conclusive and cannot be reviewed on appeal to this Court (Amigo
v. Teves, 96 Phil. 252), provided they are borne out by the record or are based on substantial evidence (Alsua-Betts v. Court of
Appeals, 92 SCRA 332). However, this rule admits of certain exceptions. Thus, in Carolina Industries Inc. v. CMS Stock Brokerage,
Inc., et al., (97 SCRA 734), we held that this Court retains the power to review and rectify the findings of fact of the Court of Appeals
when (1) the conclusion is a finding grounded entirely on speculation, surmises and conjectures; (2) when the inference made is
manifestly mistaken absurd and impossible; (3) where there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; and (5) when the court, in making its findings, went beyond the issues of the case and the same are contrary
to the admissions of both the appellant and the appellee.

In this case, there is misapprehension of facts. The evidence of the private respondent himself shows that his investment in the "Voice
of Veterans" project amounted to only P3,000.00. The remaining P4,000.00 was the amount of profit that the private respondent
expected to receive.

The records show the following exhibits- têñ.£îhqwâ£

E — Xerox copy of PNB Manager's Check No. 234265 dated March 22, 1971 in favor of defendant. Defendant
admitted the authenticity of this check and of his receipt of the proceeds thereof (t.s.n., pp. 3-4, Nov. 29, 1972).
This exhibit is being offered for the purpose of showing plaintiff's capital investment in the printing of the "Voice
of the Veterans" for which he was promised a fixed profit of P8,000. This investment of P6,000.00 and the
promised profit of P8,000 are covered by defendant's promissory note for P14,000 dated March 31, 1971 marked
by defendant as Exhibit 2 (t.s.n., pp. 20-21, Nov. 29, 1972), and by plaintiff as Exhibit P. Later, defendant returned
P3,000.00 of the P6,000.00 investment thereby proportionately reducing the promised profit to P4,000. With the
balance of P3,000 (capital) and P4,000 (promised profit), defendant signed and executed the promissory note for
P7,000 marked Exhibit 3 for the defendant and Exhibit M for plaintiff. Of this P7,000, defendant paid P4,000
representing full return of the capital investment and P1,000 partial payment of the promised profit. The P3,000
balance of the promised profit was made part consideration of the P20,000 promissory note (t.s.n., pp. 22-24,
Nov. 29, 1972). It is, therefore, being presented to show the consideration for the P20,000 promissory note.

F — Xerox copy of PNB Manager's check dated May 29, 1971 for P7,000 in favor of defendant. The authenticity
of the check and his receipt of the proceeds thereof were admitted by the defendant (t.s.n., pp. 3-4, Nov. 29,
1972). This P 7,000 is part consideration, and in cash, of the P20,000 promissory note (t.s.n., p. 25, Nov. 29,
1972), and it is being presented to show the consideration for the P20,000 note and the existence and validity of
the obligation.

xxx xxx xxx

L-Book entitled "Voice of the Veterans" which is being offered for the purpose of showing the subject matter of
the other partnership agreement and in which plaintiff invested the P6,000 (Exhibit E) which, together with the
promised profit of P8,000 made up for the consideration of the P14,000 promissory note (Exhibit 2; Exhibit P). As
explained in connection with Exhibit E. the P3,000 balance of the promised profit was later made part
consideration of the P20,000 promissory note.

M-Promissory note for P7,000 dated March 30, 1971. This is also defendant's Exhibit E. This document is being
offered for the purpose of further showing the transaction as explained in connection with Exhibits E and L.

N-Receipt of plaintiff dated March 30, 1971 for the return of his P3,000 out of his capital investment of P6,000
(Exh. E) in the P14,000 promissory note (Exh. 2; P). This is also defendant's Exhibit 4. This document is being
offered in support of plaintiff's explanation in connection with Exhibits E, L, and M to show the transaction
mentioned therein.

xxx xxx xxx

P-Promissory note for P14,000.00. This is also defendant's Exhibit 2. It is being offered for the purpose of showing
the transaction as explained in connection with Exhibits E, L, M, and N above.
Explaining the above-quoted exhibits, respondent Pecson testified that: têñ.£îhqwâ£

Q During the pre-trial of this case, Mr. Pecson, the defendant presented a promissory note
in the amount of P14,000.00 which has been marked as Exhibit 2. Do you know this
promissory note?
A Yes, sir.
Q What is this promissory note, in connection with your transaction with the defendant?
A This promissory note is for the printing of the "Voice of the Veterans".
Q What is this "Voice of the Veterans", Mr. Pecson?
A It is a book.têñ.£îhqwâ£
(T.S.N., p. 19, Nov. 29, 1972)
Q And what does the amount of P14,000.00 indicated in the promissory note, Exhibit 2,
represent?
A It represents the P6,000.00 cash which I gave to Mr. Moran, as evidenced by the Philippine
National Bank Manager's check and the P8,000.00 profit assured me by Mr. Moran which I
will derive from the printing of this "Voice of the Veterans" book.
Q You said that the P6,000.00 of this P14,000.00 is covered by, a Manager's check. I show
you Exhibit E, is this the Manager's check that mentioned?
A Yes, sir.
Q What happened to this promissory note of P14,000.00 which you said represented
P6,000.00 of your investment and P8,000.00 promised profits?
A Latter, Mr. Moran returned to me P3,000.00 which represented one-half (1/2) of the
P6,000.00 capital I gave to him.
Q As a consequence of the return by Mr. Moran of one-half (1/2) of the P6,000.00 capital you
gave to him, what happened to the promised profit of P8,000.00?
A It was reduced to one-half (1/2) which is P4,000.00.
Q Was there any document executed by Mr. Moran in connection with the Balance of
P3,000.00 of your capital investment and the P4,000.00 promised profits?
A Yes, sir, he executed a promissory note.
Q I show you a promissory note in the amount of P7,000.00 dated March 30, 1971 which for
purposes of Identification I request the same to be marked as Exhibit M. . .
Court têñ.£îhqwâ£
Mark it as Exhibit M.
Q (continuing) is this the promissory note which you said was executed by Mr. Moran in
connection with your transaction regarding the printing of the "Voice of the Veterans"?
A Yes, sir. (T.S.N., pp. 20-22, Nov. 29, 1972).
Q What happened to this promissory note executed by Mr. Moran, Mr. Pecson?
A Mr. Moran paid me P4,000.00 out of the P7,000.00 as shown by the promissory note.
Q Was there a receipt issued by you covering this payment of P4,000.00 in favor of Mr.
Moran?
A Yes, sir.
(T.S.N., p. 23, Nov. 29, 1972).
Q You stated that Mr. Moran paid the amount of P4,000.00 on account of the P7,000.00
covered by the promissory note, Exhibit M. What does this P4,000.00 covered by Exhibit N
represent?
A This P4,000.00 represents the P3,000.00 which he has returned of my P6,000.00 capital
investment and the P1,000.00 represents partial payment of the P4,000.00 profit that was
promised to me by Mr. Moran.
Q And what happened to the balance of P3,000.00 under the promissory note, Exhibit M?
A The balance of P3,000.00 and the rest of the profit was applied as part of the consideration
of the promissory note of P20,000.00.

(T.S.N., pp. 23-24, Nov. 29, 1972).

The respondent court erred when it concluded that the project never left the ground because the project did take place. Only it failed.
It was the private respondent himself who presented a copy of the book entitled "Voice of the Veterans" in the lower court as Exhibit
"L". Therefore, it would be error to state that the project never took place and on this basis decree the return of the private respondent's
investment.

As already mentioned, there are risks in any business venture and the failure of the undertaking cannot entirely be blamed on the
managing partner alone, specially if the latter exercised his best business judgment, which seems to be true in this case. In view of
the foregoing, there is no reason to pass upon the fourth and fifth assignments of errors raised by the petitioner. We likewise find no
valid basis for the grant of the counterclaim.

WHEREFORE, the petition is GRANTED. The decision of the respondent Court of Appeals (now Intermediate Appellate Court) is
hereby SET ASIDE and a new one is rendered ordering the petitioner Isabelo Moran, Jr., to pay private respondent Mariano Pecson
SIX THOUSAND (P6,000.00) PESOS representing the amount of the private respondent's contribution to the partnership but which
remained unused; and THREE THOUSAND (P3,000.00) PESOS representing one half (1/2) of the net profits gained by the
partnership in the sale of the two thousand (2,000) copies of the posters, with interests at the legal rate on both amounts from the date
the complaint was filed until full payment is made. SO ORDERED.

Article 1788 - Effect of Failure to Contribute and Obligation for Conversion

1.

No. L-19819. October 26, 1977.*

WILLIAM UY, plaintiff-appellee, vs. BARTOLOME PUZON, substituted by FRANCO PUZON, defendant-appellant.

CONCEPCION JR., J.:têñ.£îhqwâ£

Appeal from the decision of the Court of First Instanre of Manila, dissolving the "U.P. Construction Company" and ordering the
defendant Bartolome Puzon to pay the plaintiff the amounts of: (1) P115,102.13, with legal interest thereon from the date of the filing
of the complaint until fully paid; (2) P200,000.00, as plaintiffs share in the unrealized profits of the "U.P. Construction Company" and
(3) P5,000.00, as and for attorney's fees.

It is of record that the defendant Bartolome Puzon had a contract with the Republic of the Philippines for the construction of the
Ganyangan Bato Section of the Pagadian Zamboanga City Road, province of Zamboanga del Sur 1 and of five (5) bridges in the
Malangas-Ganyangan Road. 2 Finding difficulty in accomplishing both projects, Bartolome Puzon sought the financial assistance of
the plaintiff, William Uy. As an inducement, Puzon proposed the creation of a partnership between them which would be the sub-
contractor of the projects and the profits to be divided equally between them. William Uy inspected the projects in question and,
expecting to derive considerable profits therefrom, agreed to the proposition, thus resulting in the formation of the "U.P. Construction
Company" 3 which was subsequently engaged as subcontractor of the construction projects. 4

The partners agreed that the capital of the partnership would be P100,000.00 of which each partner shall contribute the amount of
P50,000.00 in cash. 5 But, as heretofore stated, Puzon was short of cash and he promised to contribute his share in the partnership
capital as soon as his application for a loan with the Philippine National Bank in the amount of P150,000.00 shall have been approved.
However, before his loan application could be acted upon, he had to clear his collaterals of its incumbrances first. For this purpose,
on October 24, 1956, Wilham Uy gave Bartolome Puzon the amount of P10,000.00 as advance contribution of his share in the
partnership to be organized between them under the firm name U.P. CONSTRUCTION COMPANY which amount mentioned above
will be used by Puzon to pay his obligations with the Philippine National Bank to effect the release of his mortgages with the said
Bank. 6 On October 29, 1956, William Uy again gave Puzon the amount of P30,000.00 as his partial contribution to the proposed
partnership and which the said Puzon was to use in payment of his obligation to the Rehabilitation Finance Corporation. 7 Puzon
promised William Uy that the amount of P150,000.00 would be given to the partnership to be applied thusly: P40,000.00, as
reimbursement of the capital contribution of William Uy which the said Uy had advanced to clear the title of Puzon's property;
P50,000.00, as Puzon's contribution to the partnership; and the balance of P60,000.00 as Puzon's personal loan to the partnership. 8

Although the partnership agreement was signed by the parties on January 18, 1957,9 work on the projects was started by the
partnership on October 1, 1956 in view of the insistence of the Bureau of Public Highways to complete the project right away. 10 Since
Puzon was busy with his other projects, William Uy was entrusted with the management of the projects and whatever expense the
latter might incur, would be considered as part of his contribution. 11 At the end of December, 1957, William Uy had contributed to the
partnership the amount of P115,453.39, including his capital. 12

The loan of Puzon was approved by the Philippine National Bank in November, 1956 and he gave to William Uy the amount of
P60,000.00. Of this amount, P40,000.00 was for the reimbursement of Uy's contribution to the partnership which was used to clear
the title to Puzon's property, and the P20,000.00 as Puzon's contribution to the partnership capital. 13

To guarantee the repayment of the above-mentioned loan, Bartolome Puzon, without the knowledge and consent of William
Uy, 14 assigned to the Philippine National Bank all the payments to be received on account of the contracts with the Bureau of Public
Highways for the construction of the afore-mentioned projects. 15 By virtue of said assignment, the Bureau of Public Highways paid
the money due on the partial accomplishments on the government projects in question to the Philippine National Bank which, in turn,
applied portions of it in payment of Puzon's loan. Of the amount of P1,047,181.07, released by the Bureau of Public Highways in
payment of the partial work completed by the partnership on the projects, the amount of P332,539.60 was applied in payment of
Puzon's loan and only the amount of P27,820.80 was deposited in the partnership funds, 16 which, for all practical purposes, was also
under Puzon's account since Puzon was the custodian of the common funds.

As time passed and the financial demands of the projects increased, William Uy, who supervised the said projects, found difficulty in
obtaining the necessary funds with which to pursue the construction projects. William Uy correspondingly called on Bartolome Puzon
to comply with his obligations under the terms of their partnership agreement and to place, at lest, his capital contribution at the
disposal of the partnership. Despite several promises, Puzon, however, failed to do so. 17 Realizing that his verbal demands were to
no avail, William Uy consequently wrote Bartolome Puzon pormal letters of demand, 18 to which Puzon replied that he is unable to put
in additional capital to continue with the projects. 19
Failing to reach an agreement with William Uy, Bartolome Puzon, as prime contractor of the construction projects, wrote the
subcontractor, U.P. Construction Company, on November 20, 1957, advising the partnership, of which he is also a partner, that unless
they presented an immediate solution and capacity to prosecute the work effectively, he would be constrained to consider the sub-
contract terminated and, thereafter, to assume all responsibilities in the construction of the projects in accordance with his original
contract with the Bureau of Public Highways. 20 On November 27, 1957, Bartolome Puzon again wrote the U.P.Construction Company
finally terminating their subcontract agreement as of December 1, 1957. 21

Thereafter, William Uy was not allowed to hold office in the U.P. Construction Company and his authority to deal with the Bureau of
Public Highways in behalf of the partnership was revoked by Bartolome Puzon who continued with the construction projects alone. 22

On May 20, 1958, William Uy, claiming that Bartolome Puzon had violated the terms of their partnership agreement, instituted an
action in court, seeking, inter alia, the dissolution of the partnership and payment of damages.

Answering, Bartolome Puzon denied that he violated the terms of their agreement claiming that it was the plaintiff, William Uy, who
violated the terms thereof. He, likewise, prayed for the dissolution of the partnership and for the payment by the plaintiff of his, share
in the losses suffered by the partnership.

After appropriate proceedings, the trial court found that the defendant, contrary to the terms of their partnership agreement, failed to
contribute his share in the capital of the partnership applied partnership funds to his personal use; ousted the plaintiff from the
management of the firm, and caused the failure of the partnership to realize the expected profits of at least P400,000.00. As a
consequence, the trial court dismissed the defendant's counterclaim and ordered the dissolution of the partnership. The trial court
further ordered the defendant to pay the plaintiff the sum of P320,103.13.

Hence, the instant appeal by the defendant Bartolome Puzon during the pendency of the appeal before this Court, the said Bartolome
Puzon died, and was substituted by Franco Puzon.

The appellant makes in his brief nineteen (19) assignment of errors, involving questions of fact, which relates to the following points:

(1) That the appellant is not guilty of breach of contract; and

(2) That the amounts of money the appellant has been order to pay the appellee is not supported by the evidence and the law.

After going over the record, we find no reason for rejecting the findings of fact below, justifying the reversal of the decision appealed
from.

The findings of the trial court that the appellant failed to contribute his share in the capital of the partnership is clear incontrovertible.
The record shows that after the appellant's loan the amount of P150,000.00 was approved by the Philippin National Bank in November,
1956, he gave the amount P60,000.00 to the appellee who was then managing the construction projects. Of this amount, P40,000.00
was to be applied a reimbursement of the appellee's contribution to the partnership which was used to clear the title to the appellant's
property, and th balance of P20,000.00, as Puzon's contribution to the partnership. 23 Thereafter, the appellant failed to make any
further contributions the partnership funds as shown in his letters to the appellee wherein he confessed his inability to put in additional
capital to continue with the projects. 24

Parenthetically, the claim of the appellant that the appellee is equally guilty of not contributing his share in the partnership capital
inasmuch as the amount of P40,000.00, allegedly given to him in October, 1956 as partial contribution of the appellee is merely a
personal loan of the appellant which he had paid to the appellee, is plainly untenable. The terms of the receipts signed by the appellant
are clear and unequivocal that the sums of money given by the appellee are appellee's partial contributions to the partnership capital.
Thus, in the receipt for P10,000.00 dated October 24, 1956, 25 the appellant stated:ñé+.£ªwph!1

Received from Mr. William Uy the sum of TEN THOUSAND PESOS (P10,000.00) in Check No. SC 423285
Equitable Banking Corporation, dated October 24, 1956, as advance contribution of the share of said William Uy
in the partnership to be organized between us under the firm name U.P. CONSTRUCTION COMPANY which
amount mentioned above will be used by the undersigned to pay his obligations with the Philippine National Bank
to effect the release of his mortgages with the said bank. (Emphasis supplied)

In the receipt for the amount of P30,000.00 dated October 29, 1956, 26 the appellant also said:ñé+.£ªwph!1

Received from William Uy the sum of THIRTY THOUSAND PESOS (P30,000.00) in Check No. SC423287, of the
Equitable Banking Corporation, as partial contribution of the share of the said William Uy to the U.P.
CONSTRUCTION COMPANY for which the undersigned will use the said amount in payment of his obligation to
the Rehabilitation Finance Corporation. (Emphasis supplied)
The findings of the trial court that the appellant misapplied partnership funds is, likewise, sustained by competent evidence. It is of
record that the appellant assigned to the Philippine National Bank all the payments to be received on account of the contracts with
the Bureau of Public Highways for the construction of the aforementioned projects to guarantee the repayment of the bank. 27 By virtue
of the said appeflant's personal loan with the said bank assignment, the Bureau of Public Highways paid the money due on the partial
accomplishments on the construction projects in question to the Philippine National Bank who, in turn, applied portions of it in payment
of the appellant's loan. 28

The appellant claims, however, that the said assignment was made with the consent of the appellee and that the assignment not
prejudice the partnership as it was reimbursed by the appellant.

But, the appellee categorically stated that the assignment to the Philippine National Bank was made without his prior knowledge and
consent and that when he learned of said assignment, he cal the attention of the appellant who assured him that the assignment was
only temporary as he would transfer the loan to the Rehabilitation Finance Corporation within three (3) months time. 29

The question of whom to believe being a matter large dependent on the trier's discretion, the findings of the trial court who had the
better opportunity to examine and appraise the fact issue, certainly deserve respect.

That the assignment to the Philippine National Bank prejudicial to the partnership cannot be denied. The record show that during the
period from March, 1957 to September, 1959, the appellant Bartolome Puzon received from the Bureau of Public highways, in payment
of the work accomplished on the construction projects, the amount of P1,047,181.01, which amount rightfully and legally belongs to
the partnership by virtue of the subcontract agreements between the appellant and the U.P. Construction Company. In view of the
assignemt made by Puzon to the Philippine National Bank, the latter withheld and applied the amount of P332,539,60 in payment of
the appellant's personal loan with the said bank. The balance was deposited in Puzon's current account and only the amount of
P27,820.80 was deposited in the current account of the partnership. 30 For sure, if the appellant gave to the partnership all that were
eamed and due it under the subcontract agreements, the money would have been used as a safe reserve for the discharge of all
obligations of the firm and the partnership would have been able to successfully and profitably prosecute the projects it subcontracted.

When did the appellant make the reimbursement claimed by him?

For the same period, the appellant actually disbursed for the partnership, in connection with the construction projects, the amount of
P952,839.77. 31 Since the appellant received from the Bureau of Public Highways the sum of P1,047,181.01, the appellant has a
deficit balance of P94,342.24. The appellant, therefore, did not make complete restitution.

The findings of the trial court that the appellee has been ousted from the management of the partnership is also based upon persuasive
evidence. The appellee testified that after he had demanded from the appellant payment of the latter's contribution to the partnership
capital, the said appellant did not allow him to hold office in the U.P. Construction Company and his authority to deal with the Bureau
of Public Highways was revoked by the appellant. 32

As the record stands, We cannot say, therefore, that the decis of the trial court is not sustained by the evidence of record as warrant
its reverw.

Since the defendantappellant was at fauh, the tral court properly ordered him to reimburse the plaintiff-appellee whatever amount
latter had invested in or spent for the partnership on account of construction projects.

How much did the appellee spend in the construction projects question?

It appears that although the partnership agreement stated the capital of the partnership is P100,000.00 of which each part shall
contribute to the partnership the amount of P50,000.00 cash 33 the partners of the U.P. Construction Company did contribute their
agreed share in the capitalization of the enterprise in lump sums of P50,000.00 each. Aside from the initial amount P40,000.00 put up
by the appellee in October, 1956, 34 the partners' investments took, the form of cash advances coveting expenses of the construction
projects as they were incurred. Since the determination of the amount of the disbursements which each of them had made for the
construction projects require an examination of the books of account, the trial court appointed two commissioners, designated by the
parties, "to examine the books of account of the defendant regarding the U.P. Construction Company and his personal account with
particular reference to the Public Works contract for the construction of the Ganyangan-Bato Section, Pagadian-Zamboanga City
Road and five (5) Bridges in Malangas-Ganyangan Road, including the payments received by defendant from the Bureau of Public
Highways by virtue of the two projects above mentioned, the disbursements or disposition made by defendant of the portion thereof
released to him by the Philippine National Bank and in whose account these funds are deposited . 35

36
In due time, the loners so appointed, submitted their report 37 they indicated the items wherein they are in agreement, as well as
their points of disagreement.

In the commissioners' report, the appellant's advances are listed under Credits; the money received from the firm, under Debits; and
the resulting monthly investment standings of the partners, under Balances. The commissioners are agreed that at the end of
December, 1957, the appellee had a balance of P8,242.39. 38 It is in their respective adjustments of the capital account of the appellee
that the commissioners had disagreed.

Mr. Ablaza, designated by the appellant, would want to charge the appellee with the sum of P24,239.48, representing the checks
isssued by the appellant, 39 and encashed by the appellee or his brother, Uy Han so that the appellee would owe the partnership the
amount of P15,997.09.

Mr. Tayag, designated by the appellee, upon the other hand, would credit the appellee the following additional amounts:

(1) P7,497.80 — items omitted from the books of partnership but recognized and charged to Miscellaneous Expenses by Mr. Ablaza;

(2) P65,103.77 — payrolls paid by the appellee in the amount P128,103.77 less payroll remittances from the appellant in amount of
P63,000.00; and

(3) P26,027.04 other expeses incurred by the appellee at construction site.

With respect to the amount of P24,239.48, claimed by appellant, we are hereunder adopting the findings of the trial which we find to
be in accord with the evidence:

To enhance defendant's theory that he should be credited P24,239.48, he presented checks allegedly given to plaintiff and the latter's
brother, Uy Han, marked as Exhibits 2 to 11. However, defendant admitted that said cheeks were not entered nor record their books
of account, as expenses for and in behalf of partnership or its affairs. On the other hand, Uy Han testified that of the cheeks he
received were exchange for cash, while other used in the purchase of spare parts requisitioned by defendant. This testimony was not
refuted to the satisfaction of the Court, considering that Han's explanation thereof is the more plausible because if they were employed
in the prosecution of the partners projects, the corresponding disbursements would have certainly been recorded in its books, which
is not the case. Taking into account defendant is the custodian of the books of account, his failure to so enter therein the alleged
disbursements, accentuates the falsity of his claim on this point. 40

Besides, as further noted by the trial court, the report Commissioner Ablaza is unreliable in view of his proclivity to favor the appellant
and because of the inaccurate accounting procedure adopted by him in auditing the books of account of the partnership unlike Mr.
Tayag's report which inspires faith and credence. 41

As explained by Mr. Tayag, the amount of P7,497.80 represen expenses paid by the appellee out of his personal funds which not
been entered in the books of the partnership but which been recognized and conceded to by the auditor designated by the appellant
who included the said amount under Expenses. 42

43
The explanation of Mr. Tayag on the inclusion of the amount of P65,103.77 is likewise clear and convincing.

As for the sum of of P26,027.04, the same represents the expenses which the appelle paid in connection withe the projects and not
entered in the books of the partnership since all vouchers and receipts were sent to the Manila office which were under the control of
the appellant. However, officer which were under the control of the appellant. However, a list of these expenses are incorporated in
Exhibits ZZ, ZZ-1 to ZZ-4.

In resume', the appelllee's credit balance would be as follows:

ñé+.£ªwph!1

Undisputed balance
as of Dec. 1967

Add: Items omitted P 8,242.

from the books but

recognized and
charged to
Miscellaneous

Expenses by Mr. 7,497.80

Ablaza
 Add: P128,103.77
Payrolls
paid by the
appellee

Less: 63,000.00 65,103.77

Payroll
remittances
received

Add: Other
expenses
incurred at
the

site (Exhs, 26,027.04

ZZ, ZZ-1 to
ZZ-4)

TOTAL P106,871.00

At the trial, the appellee presented a claim for the amounts of P3,917.39 and P4,665.00 which he also advanced for the construction
projects but which were not included in the Commissioner's Report. 44

Appellee's total investments in the partnership would, therefore, be:

Appellee's total P106,871.00

credits

Add: unrecorded 3,917,39

balances for the
month of Dec.
1957 (Exhs.
KKK, KK-1 to
KKK_19, KKK-
22)

Add: Payments 4,665.00

to Munoz, as
subcontractor of
five,(5) Bridges
(p. 264 tsn; Exhs.
KKK-20, KKK-
21)

Total Pl 15,453.39
Investments

Regarding the award of P200,000.00 as his share in the unrealized profits of the partnership, the appellant contends that the findings
of the trial court that the amount of P400,000.00 as reasonable profits of the partnership venture is without any basis and is not
supported by the evidence. The appemnt maintains that the lower court, in making its determination, did not take into consideration
the great risks involved in business operations involving as it does the completion of the projects within a definite period of time, in the
face of adverse and often unpredictable circumstances, as well as the fact that the appellee, who was in charge of the projects in the
field, contributed in a large measure to the failure of the partnership to realize such profits by his field management.

This argument must be overruled in the light of the law and evidence on the matter. Under Article 2200 of the Civil Code,
indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee
failed to obtain. In other words lucrum cessans is also a basis for indemnification.

Has the appellee failed to make profits because of appellant's breach of contract?
There is no doubt that the contracting business is a profitable one and that the U.P. Construction Company derived some profits from'
co io oa ects its sub ntracts in the construction of the road and bridges projects its deficient working capital and the juggling of its funds
by the appellant.

Contrary to the appellant's claim, the partnership showed some profits during the period from July 2, 1956 to December 31, 1957. If
the Profit and Loss Statement 45 showed a net loss of P134,019.43, this was primarily due to the confusing accounting method
employed by the auditor who intermixed h and accthe cas ruamethod of accounting and the erroneous inclusion of certain items, like
personal expenses of the appellant and afteged extraordinary losses due to an accidental plane crash, in the operating expenses of
the partnership, Corrected, the Profit and Loss Statement would indicate a net profit of P41,611.28.

46
For the period from January 1, 1958 to September 30, 1959, the partnership admittedly made a net profit of P52,943.89.

Besides, as We have heretofore pointed out, the appellant received from the Bureau of Public Highways, in payment of the zonstruction
projects in question, the amount of P1,047,181.01 47 and disbursed the amount of P952,839.77, 48 leaving an unaccounted balance
of P94,342.24. Obviously, this amount is also part of the profits of the partnership.

During the trial of this case, it was discovered that the appellant had money and credits receivable froin the projects in question, in the
custody of the Bureau of Public Highways, in the amount of P128,669.75, representing the 10% retention of said projects.49 After the
trial of this case, it was shown that the total retentions Wucted from the appemnt amounted to P145,358.00. 50 Surely, these retained
amounts also form part of the profits of the partnership.

Had the appellant not been remiss in his obligations as partner and as prime contractor of the construction projects in question as he
was bound to perform pursuant to the partnership and subcontract agreements, and considering the fact that the total contract amount
of these two projects is P2,327,335.76, it is reasonable to expect that the partnership would have earned much more than the
P334,255.61 We have hereinabove indicated. The award, therefore, made by the trial court of the amount of P200,000.00, as
compensatory damages, is not speculative, but based on reasonable estimate.

WHEREFORE, finding no error in the decision appealed from, the said decision is hereby affirmed with costs against the appellant, it
being understood that the liability mentioned herein shall be home by the estate of the deceased Bartolome Puzon, represented in
this instance by the administrator thereof, Franco Puzon. SO ORDERED.

Article 1789 - Obligations of an Industrial Partner

1.

No. L-31684. June 28, 1973.

EVANGELISTA & Co., DOMINGO C. EVANGELISTA,JR., CONCHITA B. NAVARRO and LEONARDA ATIENZA ABAD SANTOS,
petitioners, vs. ESTRELLA ABAD SANTOS, respondent.

MAKALINTAL, J.:

On October 9, 1954 a co-partnership was formed under the name of "Evangelista & Co." On June 7, 1955 the Articles of Co-partnership
was amended as to include herein respondent, Estrella Abad Santos, as industrial partner, with herein petitioners Domingo C.
Evangelista, Jr., Leonardo Atienza Abad Santos and Conchita P. Navarro, the original capitalist partners, remaining in that capacity,
with a contribution of P17,500 each. The amended Articles provided, inter alia, that "the contribution of Estrella Abad Santos consists
of her industry being an industrial partner", and that the profits and losses "shall be divided and distributed among the partners ... in
the proportion of 70% for the first three partners, Domingo C. Evangelista, Jr., Conchita P. Navarro and Leonardo Atienza Abad Santos
to be divided among them equally; and 30% for the fourth partner Estrella Abad Santos."

On December 17, 1963 herein respondent filed suit against the three other partners in the Court of First Instance of Manila, alleging
that the partnership, which was also made a party-defendant, had been paying dividends to the partners except to her; and that
notwithstanding her demands the defendants had refused and continued to refuse and let her examine the partnership books or to
give her information regarding the partnership affairs to pay her any share in the dividends declared by the partnership. She therefore
prayed that the defendants be ordered to render accounting to her of the partnership business and to pay her corresponding share in
the partnership profits after such accounting, plus attorney's fees and costs.

The defendants, in their answer, denied ever having declared dividends or distributed profits of the partnership; denied likewise that
the plaintiff ever demanded that she be allowed to examine the partnership books; and byway of affirmative defense alleged that the
amended Articles of Co-partnership did not express the true agreement of the parties, which was that the plaintiff was not an industrial
partner; that she did not in fact contribute industry to the partnership; and that her share of 30% was to be based on the profits which
might be realized by the partnership only until full payment of the loan which it had obtained in December, 1955 from the Rehabilitation
Finance Corporation in the sum of P30,000, for which the plaintiff had signed a promisory note as co-maker and mortgaged her
property as security.

The parties are in agreement that the main issue in this case is "whether the plaintiff-appellee (respondent here) is an industrial partner
as claimed by her or merely a profit sharer entitled to 30% of the net profits that may be realized by the partnership from June 7, 1955
until the mortgage loan from the Rehabilitation Finance Corporation shall be fully paid, as claimed by appellants (herein petitioners)."
On that issue the Court of First Instance found for the plaintiff and rendered judgement "declaring her an industrial partner of
Evangelista & Co.; ordering the defendants to render an accounting of the business operations of the (said) partnership ... from June
7, 1955; to pay the plaintiff such amounts as may be due as her share in the partnership profits and/or dividends after such an
accounting has been properly made; to pay plaintiff attorney's fees in the sum of P2,000.00 and the costs of this suit."

The defendants appealed to the Court of Appeals, which thereafter affirmed judgments of the court a quo.

In the petition before Us the petitioners have assigned the following errors:

I. The Court of Appeals erred in the finding that the respondent is an industrial partner of Evangelista & Co.,
notwithstanding the admitted fact that since 1954 and until after promulgation of the decision of the appellate
court the said respondent was one of the judges of the City Court of Manila, and despite its findings that
respondent had been paid for services allegedly contributed by her to the partnership. In this connection the Court
of Appeals erred:

(A) In finding that the "amended Articles of Co-partnership," Exhibit "A" is conclusive
evidence that respondent was in fact made an industrial partner of Evangelista & Co.

(B) In not finding that a portion of respondent's testimony quoted in the decision proves that
said respondent did not bind herself to contribute her industry, and she could not, and in fact
did not, because she was one of the judges of the City Court of Manila since 1954.

(C) In finding that respondent did not in fact contribute her industry, despite the appellate
court's own finding that she has been paid for the services allegedly rendered by her, as well
as for the loans of money made by her to the partnership.

II. The lower court erred in not finding that in any event the respondent was lawfully excluded from, and deprived
of, her alleged share, interests and participation, as an alleged industrial partner, in the partnership Evangelista
& Co., and its profits or net income.

III. The Court of Appeals erred in affirming in toto the decision of the trial court whereby respondent was declared
an industrial partner of the petitioner, and petitioners were ordered to render an accounting of the business
operation of the partnership from June 7, 1955, and to pay the respondent her alleged share in the net profits of
the partnership plus the sum of P2,000.00 as attorney's fees and the costs of the suit, instead of dismissing
respondent's complaint, with costs, against the respondent.

It is quite obvious that the questions raised in the first assigned errors refer to the facts as found by the Court of Appeals. The evidence
presented by the parties as the trial in support of their respective positions on the issue of whether or not the respondent was an
industrial partner was thoroughly analyzed by the Court of Appeals on its decision, to the extent of reproducing verbatim therein the
lengthy testimony of the witnesses.

It is not the function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction being limited to reviewing
errors of law that might have been commited by the lower court. It should be observed, in this regard, that the Court of Appeals did
not hold that the Articles of Co-partnership, identified in the record as Exhibit "A", was conclusive evidence that the respondent was
an industrial partner of the said company, but considered it together with other factors, consisting of both testimonial and documentary
evidences, in arriving at the factual conclusion expressed in the decision.

The findings of the Court of Appeals on the various points raised in the first assignment of error are hereunder reproduced if only to
demonstrate that the same were made after a through analysis of then evidence, and hence are beyond this Court's power of review.

The aforequoted findings of the lower Court are assailed under Appellants' first assigned error, wherein it is
pointed out that "Appellee's documentary evidence does not conclusively prove that appellee was in fact admitted
by appellants as industrial partner of Evangelista & Co." and that "The grounds relied upon by the lower Court
are untenable" (Pages 21 and 26, Appellant's Brief).

The first point refers to Exhibit A, B, C, K, K-1, J, N and S, appellants' complaint being that "In finding that the
appellee is an industrial partner of appellant Evangelista & Co., herein referred to as the partnership — the lower
 court relied mainly on the appellee's documentary evidence, entirely disregarding facts and circumstances
established by appellants" evidence which contradict the said finding' (Page 21, Appellants' Brief). The lower
court could not have done otherwise but rely on the exhibits just mentioned, first, because appellants have
admitted their genuineness and due execution, hence they were admitted without objection by the lower court
when appellee rested her case and, secondly the said exhibits indubitably show the appellee is an industrial
partner of appellant company. Appellants are virtually estopped from attempting to detract from the probative
force of the said exhibits because they all bear the imprint of their knowledge and consent, and there is no credible
showing that they ever protested against or opposed their contents prior of the filing of their answer to appellee's
complaint. As a matter of fact, all the appellant Evangelista, Jr., would have us believe — as against the
cumulative force of appellee's aforesaid documentary evidence — is the appellee's Exhibit "A", as confirmed and
corroborated by the other exhibits already mentioned, does not express the true intent and agreement of the
parties thereto, the real understanding between them being the appellee would be merely a profit sharer entitled
to 30% of the net profits that may be realized between the partners from June 7, 1955, until the mortgage loan of
P30,000.00 to be obtained from the RFC shall have been fully paid. This version, however, is discredited not only
by the aforesaid documentary evidence brought forward by the appellee, but also by the fact that from June 7,
1955 up to the filing of their answer to the complaint on February 8, 1964 — or a period of over eight (8) years —
appellants did nothing to correct the alleged false agreement of the parties contained in Exhibit "A". It is thus
reasonable to suppose that, had appellee not filed the present action, appellants would not have advanced this
obvious afterthought that Exhibit "A" does not express the true intent and agreement of the parties thereto.

At pages 32-33 of appellants' brief, they also make much of the argument that 'there is an overriding fact which
proves that the parties to the Amended Articles of Partnership, Exhibit "A", did not contemplate to make the
appellee Estrella Abad Santos, an industrial partner of Evangelista & Co. It is an admitted fact that since before
the execution of the amended articles of partnership, Exhibit "A", the appellee Estrella Abad Santos has been,
and up to the present time still is, one of the judges of the City Court of Manila, devoting all her time to the
performance of the duties of her public office. This fact proves beyond peradventure that it was never
contemplated between the parties, for she could not lawfully contribute her full time and industry which is the
obligation of an industrial partner pursuant to Art. 1789 of the Civil Code.

The Court of Appeals then proceeded to consider appellee's testimony on this point, quoting it in the decision, and then concluded as
follows:

One cannot read appellee's testimony just quoted without gaining the very definite impression that, even as she
was and still is a Judge of the City Court of Manila, she has rendered services for appellants without which they
would not have had the wherewithal to operate the business for which appellant company was organized. Article
1767 of the New Civil Code which provides that "By contract of partnership two or more persons bind themselves,
to contribute money, property, or industry to a common fund, with the intention of dividing the profits among
themselves, 'does not specify the kind of industry that a partner may thus contribute, hence the said services may
legitimately be considered as appellee's contribution to the common fund. Another article of the same Code relied
upon appellants reads:

'ART. 1789. An industrial partner cannot engage in business for himself, unless the
partnership expressly permits him to do so; and if he should do so, the capitalist partners
may either exclude him from the firm or avail themselves of the benefits which he may have
obtained in violation of this provision, with a right to damages in either case.'

It is not disputed that the provision against the industrial partner engaging in business for himself seeks to prevent
any conflict of interest between the industrial partner and the partnership, and to insure faithful compliance by
said partner with this prestation. There is no pretense, however, even on the part of the appellee is engaged in
any business antagonistic to that of appellant company, since being a Judge of one of the branches of the City
Court of Manila can hardly be characterized as a business. That appellee has faithfully complied with her
prestation with respect to appellants is clearly shown by the fact that it was only after filing of the complaint in this
case and the answer thereto appellants exercised their right of exclusion under the codal art just mentioned by
alleging in their Supplemental Answer dated June 29, 1964 — or after around nine (9) years from June 7, 1955
— subsequent to the filing of defendants' answer to the complaint, defendants reached an agreement whereby
the herein plaintiff been excluded from, and deprived of, her alleged share, interests or participation, as an alleged
industrial partner, in the defendant partnership and/or in its net profits or income, on the ground plaintiff has never
contributed her industry to the partnership, instead she has been and still is a judge of the City Court (formerly
Municipal Court) of the City of Manila, devoting her time to performance of her duties as such judge and enjoying
the privilege and emoluments appertaining to the said office, aside from teaching in law school in Manila, without
the express consent of the herein defendants' (Record On Appeal, pp. 24-25). Having always knows as a appellee
as a City judge even before she joined appellant company on June 7, 1955 as an industrial partner, why did it
take appellants many yearn before excluding her from said company as aforequoted allegations? And how can
they reconcile such exclusive with their main theory that appellee has never been such a partner because "The
real agreement evidenced by Exhibit "A" was to grant the appellee a share of 30% of the net profits which the
appellant partnership may realize from June 7, 1955, until the mortgage of P30,000.00 obtained from the
Rehabilitation Finance Corporal shall have been fully paid." (Appellants Brief, p. 38).
 What has gone before persuades us to hold with the lower Court that appellee is an industrial partner of appellant
company, with the right to demand for a formal accounting and to receive her share in the net profit that may
result from such an accounting, which right appellants take exception under their second assigned error. Our said
holding is based on the following article of the New Civil Code:

'ART. 1899. Any partner shall have the right to a formal account as to partnership affairs:

(1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners;
(2) If the right exists under the terms of any agreement;
(3) As provided by article 1807;
(4) Whenever other circumstance render it just and reasonable.

We find no reason in this case to depart from the rule which limits this Court's appellate jurisdiction to reviewing only errors of law,
accepting as conclusive the factual findings of the lower court upon its own assessment of the evidence.

The judgment appealed from is affirmed, with costs.

Article 1797 - Rules for Distribution of Profits and Losses

1.

G.R. No. 183374. June 29, 2010.*

MARSMAN DRYSDALE LAND, INC., petitioner, vs. PHILIPPINE GEOANALYTICS, INC. AND GOTESCO PROPERTIES, INC.,
respondents.

G.R. No. 183376. June 29, 2010.*

GOTESCO PROPERTIES, INC., petitioner, vs. MARSMAN DRYSDALE LAND, INC. AND PHILIPPINE GEOANALYTICS, INC.,
respondents.

CARPIO MORALES, J.:

On February 12, 1997, Marsman Drysdale Land, Inc. (Marsman Drysdale) and Gotesco Properties, Inc. (Gotesco) entered into a Joint
Venture Agreement (JVA) for the construction and development of an office building on a land owned by Marsman Drysdale in Makati
City.1

The JVA contained the following pertinent provisions:

SECTION 4. CAPITAL OF THE JV

It is the desire of the Parties herein to implement this Agreement by investing in the PROJECT on a FIFTY (50%) PERCENT- FIFTY
(50%) PERCENT basis.

4.1. Contribution of [Marsman Drysdale]-[Marsman Drysdale] shall contribute the Property.

The total appraised value of the Property is PESOS: FOUR HUNDRED TWENTY MILLION (P420,000,000.00).

For this purpose, [Marsman Drysdale] shall deliver the Property in a buildable condition within ninety (90) days from signing of this
Agreement barring any unforeseen circumstances over which [Marsman Drysdale] has no control. Buildable condition shall mean that
the old building/structure which stands on the Property is demolished and taken to ground level.

4.2. Contribution of [Gotesco]- [Gotesco] shall contribute the amount of PESOS: FOUR HUNDRED TWENTY MILLION
(P420,000,000.00) in cash which shall be payable as follows:

4.2.1. The amount of PESOS: FIFTY MILLION (P50,000,000.00) upon signing of this Agreement.

4.2.2. The balance of PESOS: THREE HUNDRED SEVENTY MILLION (P370,000,000.00) shall be paid based on progress billings,
relative to the development and construction of the Building, but shall in no case exceed ten (10) months from delivery of the Property
in a Buildable condition as defined in section 4.1.
A joint account shall be opened and maintained by both Parties for handling of said balance, among other Project concerns.

4.3. Funding and Financing

4.3.1 Construction funding for the Project shall be obtained from the cash contribution of [Gotesco].

4.3.2 Subsequent funding shall be obtained from the pre-selling of units in the Building or, when necessary, from loans from various
banks or financial institutions. [Gotesco] shall arrange the required funding from such banks or financial institutions, under such terms
and conditions which will provide financing rates favorable to the Parties.

4.3.3 [Marsman Drysdale] shall not be obligated to fund the Project as its contribution is limited to the Property.

4.3.4 If the cost of the Project exceeds the cash contribution of [Gotesco], the proceeds obtained from the pre-selling of units and
proceeds from loans, the Parties shall agree on other sources and terms of funding such excess as soon as practicable.

4.3.5 x x x x.

4.3.6 x x x x.

4.3.7 x x x x.

4.3.8 All funds advanced by a Party (or by third parties in substitution for advances from a Party) shall be repaid by the JV.

4.3.9 If any Party agrees to make an advance to the Project but fails to do so (in whole or in part) the other party may advance the
shortfall and the Party in default shall indemnify the Party making the substitute advance on demand for all of its losses, costs and
expenses incurred in so doing. (emphasis supplied; underscoring in the original)

Via Technical Services Contract (TSC) dated July 14, 1997, 2 the joint venture engaged the services of Philippine Geoanalytics, Inc.
(PGI) to provide subsurface soil exploration, laboratory testing, seismic study and geotechnical engineering for the project. PGI, was,
however, able to drill only four of five boreholes needed to conduct its subsurface soil exploration and laboratory testing, justifying its
failure to drill the remaining borehole to the failure on the part of the joint venture partners to clear the area where the drilling was to
be made.3 PGI was able to complete its seismic study though.

PGI then billed the joint venture on November 24, 1997 for ₱284,553.50 representing the cost of partial subsurface soil exploration;
and on January 15, 1998 for ₱250,800 representing the cost of the completed seismic study. 4

Despite repeated demands from PGI,5 the joint venture failed to pay its obligations.

Meanwhile, due to unfavorable economic conditions at the time, the joint venture was cut short and the planned building project was
eventually shelved.6

PGI subsequently filed on November 11, 1999 a complaint for collection of sum of money and damages at the Regional Trial Court
(RTC) of Quezon City against Marsman Drysdale and Gotesco.

In its Answer with Counterclaim and Cross-claim, Marsman Drysdale passed the responsibility of paying PGI to Gotesco which, under
the JVA, was solely liable for the monetary expenses of the project.7

Gotesco, on the other hand, countered that PGI has no cause of action against it as PGI had yet to complete the services enumerated
in the contract; and that Marsman Drysdale failed to clear the property of debris which prevented PGI from completing its work. 8

By Decision of June 2, 2004,9 Branch 226 of the Quezon City RTC rendered judgment in favor of PGI, disposing as follows:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of plaintiff [PGI].

The defendants [Gotesco] and [Marsman Drysdale] are ordered to pay plaintiff, jointly:

(1) the sum of P535,353.50 with legal interest from the date of this decision until fully paid;
 (2) the sum of P200,000.00 as exemplary damages;

(3) the sum of P200,000.00 as and for attorney’s fees; and

(4) costs of suit.

The cross-claim of defendant [Marsman Drysdale] against defendant [Gotesco] is hereby GRANTED as follows:

a) Defendant [Gotesco] is ordered to reimburse co-defendant [Marsman Drysdale] in the amount of P535,353.[50] in
accordance with the [JVA].

b) Defendant [Gotesco] is further ordered to pay co-defendant [Marsman Drysdale] the sum of P100,000.00 as and for
attorney’s fees.

SO ORDERED. (underscoring in the original; emphasis supplied)

Marsman Drysdale moved for partial reconsideration, contending that it should not have been held jointly liable with Gotesco on PGI’s
claim as well as on the awards of exemplary damages and attorney’s fees. The motion was, by Resolution of October 28, 2005,
denied.

Both Marsman Drysdale and Gotesco appealed to the Court of Appeals which, by Decision of January 28, 2008, 10affirmed with
modification the decision of the trial court. Thus the appellate court disposed:

WHEREFORE, premises considered, the instant appeal is PARTLY GRANTED. The assailed Decision dated June 2, 2004 and the
Resolution dated October 28, 2005 of the RTC of Quezon City, Branch 226, in Civil Case No. Q99-39248 are hereby AFFIRMED with
MODIFICATION deleting the award of exemplary damages in favor of [PGI] and the P100,000.00 attorney’s fees in favor of [Marsman
Drysdale] and ordering defendant-appellant [Gotesco] to REIMBURSE [Marsman Drysdale] 50% of the aggregate sum due [PGI],
instead of the lump sum P535,353.00 awarded by the RTC. The rest of the Decision stands.

SO ORDERED. (capitalization and emphasis in the original; underscoring supplied)

In partly affirming the trial court’s decision, the appellate court ratiocinated that notwithstanding the terms of the JVA, the joint venture
cannot avoid payment of PGI’s claim since "[the JVA] could not affect third persons like [PGI] because of the basic civil law principle
of relativity of contracts which provides that contracts can only bind the parties who entered into it, and it cannot favor or prejudice a
third person, even if he is aware of such contract and has acted with knowledge thereof." 11

Their motions for partial reconsideration having been denied,12 Marsman Drysdale and Gotesco filed separate petitions for review with
the Court which were docketed as G.R. Nos. 183374 and 183376, respectively. By Resolution of September 8, 2008, the Court
consolidated the petitions.

In G.R. No. 183374, Marsman Drysdale imputes error on the appellate court in

A. …ADJUDGING [MARSMAN DRYSDALE] WITH JOINT LIABILITY AFTER CONCEDING THAT [GOTESCO] SHOULD
ULTIMATELY BE SOLELY LIABLE TO [PGI].

B. …AWARDING ATTORNEY’S FEES IN FAVOR OF [PGI]…

C. …IGNORING THE FACT THAT [PGI] DID NOT COMPLY WITH THE REQUIREMENT OF "SATISFACTORY
PERFORMANCE" OF ITS PRESTATION WHICH, PURSUANT TO THE TECHNICAL SERVICES CONTRACT, IS THE
CONDITION SINE QUA NON TO COMPENSATION.

D. …DISREGARDING CLEAR EVIDENCE SHOWING [MARSMAN DRYSDALE’S] ENTITLEMENT TO AN AWARD OF

ATTORNEY’S FEES.13

On the other hand, in G.R. No. 183376, Gotesco peddles that the appellate court committed error when it

…ORDERED [GOTESCO] TO PAY P535,353.50 AS COST OF THE WORK PERFORMED BY [PGI] AND P100,000.00 [AS]
ATTORNEY’S FEES …[AND] TO REIMBURSE [MARSMAN DRYSDALE] 50% OF P535,353.50 AND PAY [MARSMAN DRYSDALE]
P100,000.00 AS ATTORNEY’S FEES. 14
On the issue of whether PGI was indeed entitled to the payment of services it rendered, the Court sees no imperative to re-examine
the congruent findings of the trial and appellate courts thereon. Undoubtedly, the exercise involves an examination of facts which is
normally beyond the ambit of the Court’s functions under a petition for review, for it is well-settled that this Court is not a trier of facts.
While this judicial tenet admits of exceptions, such as when the findings of facts of the appellate court are contrary to those of the trial
court’s, or when the judgment is based on a misapprehension of facts, or when the findings of facts are contradicted by the evidence
on record,15these extenuating grounds find no application in the present petitions.

At all events, the Court is convinced that PGI had more than sufficiently established its claims against the joint venture. In fact,
Marsman Drysdale had long recognized PGI’s contractual claims when it (PGI) received a Certificate of Payment 16 from the joint
venture’s project manager17 which was endorsed to Gotesco for processing and payment. 18

The core issue to be resolved then is which between joint venturers Marsman Drysdale and Gotesco bears the liability to pay PGI its
unpaid claims.

To Marsman Drysdale, it is Gotesco since, under the JVA, construction funding for the project was to be obtained from Gotesco’s
cash contribution, as its (Marsman Drysdale’s) participation in the venture was limited to the land.

Gotesco maintains, however, that it has no liability to pay PGI since it was due to the fault of Marsman Drysdale that PGI was unable
to complete its undertaking.

The Court finds Marsman Drysdale and Gotesco jointly liable to PGI.

PGI executed a technical service contract with the joint venture and was never a party to the JVA. While the JVA clearly spelled out,
inter alia, the capital contributions of Marsman Drysdale (land) and Gotesco (cash) as well as the funding and financing mechanism
for the project, the same cannot be used to defeat the lawful claim of PGI against the two joint venturers-partners.

The TSC clearly listed the joint venturers Marsman Drysdale and Gotesco as the beneficial owner of the project,19and all billing invoices
indicated the consortium therein as the client.

As the appellate court held, Articles 1207 and 1208 of the Civil Code, which respectively read:

Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that
each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the
prestations.1avvphi1 There is a solidary liability only when the obligation expressly so states, or when the law or nature of the obligation
requires solidarity.

Art. 1208. If from the law, or the nature or the wording of the obligations to which the preceding article refers the contrary does not
appear, the credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors, the credits or
debts being considered distinct from one another, subject to the Rules of Court governing the multiplicity of suits. (emphasis and
underscoring supplied),

presume that the obligation owing to PGI is joint between Marsman Drysdale and Gotesco.

The only time that the JVA may be made to apply in the present petitions is when the liability of the joint venturers to each other would
set in.

A joint venture being a form of partnership, it is to be governed by the laws on partnership. 20 Article 1797 of the Civil Code provides:

Art. 1797. The losses and profits shall be distributed in conformity with the agreement. If only the share of each partner in
the profits has been agreed upon, the share of each in the losses shall be in the same proportion.

In the absence of stipulation, the share of each in the profits and losses shall be in proportion to what he may have contributed, but
the industrial partner shall not be liable for the losses. As for the profits, the industrial partner shall receive such share as may be just
and equitable under the circumstances. If besides his services he has contributed capital, he shall also receive a share in the profits
in proportion to his capital. (emphasis and underscoring supplied)

In the JVA, Marsman Drysdale and Gotesco agreed on a 50-50 ratio on the proceeds of the project.21 They did not provide for the
splitting of losses, however. Applying the above-quoted provision of Article 1797 then, the same ratio applies in splitting the
₱535,353.50 obligation-loss of the joint venture.
The appellate court’s decision must be modified, however. Marsman Drysdale and Gotesco being jointly liable, there is no need for
Gotesco to reimburse Marsman Drysdale for "50% of the aggregate sum due" to PGI.

Allowing Marsman Drysdale to recover from Gotesco what it paid to PGI would not only be contrary to the law on partnership on
division of losses but would partake of a clear case of unjust enrichment at Gotesco’s expense. The grant by the lower courts of
Marsman Drysdale cross-claim against Gotesco was thus erroneous.

Marsman Drysdale’s supplication for the award of attorney’s fees in its favor must be denied. It cannot claim that it was compelled to
litigate or that the civil action or proceeding against it was clearly unfounded, for the JVA provided that, in the event a party advances
funds for the project, the joint venture shall repay the advancing party. 22

Marsman Drysdale was thus not precluded from advancing funds to pay for PGI’s contracted services to abate any legal action against
the joint venture itself. It was in fact hardline insistence on Gotesco having sole responsibility to pay for the obligation, despite the fact
that PGI’s services redounded to the benefit of the joint venture, that spawned the legal action against it and Gotesco.

Finally, an interest of 12% per annum on the outstanding obligation must be imposed from the time of demand 23 as the delay in
payment makes the obligation one of forbearance of money, conformably with this Court’s ruling in Eastern Shipping Lines, Inc. v.
Court of Appeals.24 Marsman Drysdale and Gotesco should bear legal interest on their respective obligations.

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with MODIFICATION in that the order
for Gotesco to reimburse Marsman Drysdale is DELETED, and interest of 12% per annum on the respective obligations of Marsman
Drysdale and Gotesco is imposed, computed from the last demand or on January 5, 1999 up to the finality of the Decision.

If the adjudged amount and the interest remain unpaid thereafter, the interest rate shall be 12% per annum computed from the time
the judgment becomes final and executory until it is fully satisfied. The appealed decision is, in all other respects, affirmed.

Costs against petitioners Marsman Drysdale and Gotesco.

SO ORDERED.

2.

G.R. No. 154486. December 1, 2010.*

FEDERICO JARANTILLA, JR., petitioner, vs. ANTONIETA JARANTILLA, BUENAVENTURA REMOTIGUE, substituted by
CYNTHIA REMOTIGUE, DOROTEO JARANTILLA and TOMAS JARANTILLA, respondents

LEONARDO-DE CASTRO, J.:

This petition for review on certiorari1 seeks to modify the Decision2 of the Court of Appeals dated July 30, 2002 in CA-G.R. CV No.
40887, which set aside the Decision3 dated December 18, 1992 of the Regional Trial Court (RTC) of Quezon City, Branch 98 in Civil
Case No. Q-50464.

The pertinent facts are as follows:

The spouses Andres Jarantilla and Felisa Jaleco were survived by eight children: Federico, Delfin, Benjamin, Conchita, Rosita, Pacita,
Rafael and Antonieta.4 Petitioner Federico Jarantilla, Jr. is the grandchild of the late Jarantilla spouses by their son Federico Jarantilla,
Sr. and his wife Leda Jamili.5 Petitioner also has two other brothers: Doroteo and Tomas Jarantilla.

Petitioner was one of the defendants in the complaint before the RTC while Antonieta Jarantilla, his aunt, was the plaintiff therein. His
co-respondents before he joined his aunt Antonieta in her complaint, were his late aunt Conchita Jarantilla’s husband Buenaventura
Remotigue, who died during the pendency of the case, his cousin Cynthia Remotigue, the adopted daughter of Conchita Jarantilla
and Buenaventura Remotigue, and his brothers Doroteo and Tomas Jarantilla. 6
In 1948, the Jarantilla heirs extrajudicially partitioned amongst themselves the real properties of their deceased parents.7 With the
exception of the real property adjudicated to Pacita Jarantilla, the heirs also agreed to allot the produce of the said real properties for
the years 1947-1949 for the studies of Rafael and Antonieta Jarantilla. 8

In the same year, the spouses Rosita Jarantilla and Vivencio Deocampo entered into an agreement with the spouses Buenaventura
Remotigue and Conchita Jarantilla to provide mutual assistance to each other by way of financial support to any commercial and
agricultural activity on a joint business arrangement. This business relationship proved to be successful as they were able to establish
a manufacturing and trading business, acquire real properties, and construct buildings, among other things. 9 This partnership ended
in 1973 when the parties, in an "Agreement,"10 voluntarily agreed to completely dissolve their "joint business
relationship/arrangement."11

On April 29, 1957, the spouses Buenaventura and Conchita Remotigue executed a document wherein they acknowledged that while
registered only in Buenaventura Remotigue’s name, they were not the only owners of the capital of the businesses Manila Athletic
Supply (712 Raon Street, Manila), Remotigue Trading (Calle Real, Iloilo City) and Remotigue Trading (Cotabato City). In this same
"Acknowledgement of Participating Capital," they stated the participating capital of their co-owners as of the year 1952, with Antonieta
Jarantilla’s stated as eight thousand pesos (₱8,000.00) and Federico Jarantilla, Jr.’s as five thousand pesos (₱5,000.00).12

The present case stems from the amended complaint 13 dated April 22, 1987 filed by Antonieta Jarantilla against Buenaventura
Remotigue, Cynthia Remotigue, Federico Jarantilla, Jr., Doroteo Jarantilla and Tomas Jarantilla, for the accounting of the assets and
income of the co-ownership, for its partition and the delivery of her share corresponding to eight percent (8%), and for damages.
Antonieta claimed that in 1946, she had entered into an agreement with Conchita and Buenaventura Remotigue, Rafael Jarantilla,
and Rosita and Vivencio Deocampo to engage in business. Antonieta alleged that the initial contribution of property and money came
from the heirs’ inheritance, and her subsequent annual investment of seven thousand five hundred pesos (₱7,500.00) as additional
capital came from the proceeds of her farm. Antonieta also alleged that from 1946-1969, she had helped in the management of the
business they co-owned without receiving any salary. Her salary was supposedly rolled back into the business as additional
investments in her behalf. Antonieta further claimed co-ownership of certain properties14 (the subject real properties) in the name of
the defendants since the only way the defendants could have purchased these properties were through the partnership as they had
no other source of income.

The respondents, including petitioner herein, in their Answer, 15 denied having formed a partnership with Antonieta in 1946. They
claimed that she was in no position to do so as she was still in school at that time. In fact, the proceeds of the lands they partitioned
were devoted to her studies. They also averred that while she may have helped in the businesses that her older sister Conchita had
formed with Buenaventura Remotigue, she was paid her due salary. They did not deny the existence and validity of the
"Acknowledgement of Participating Capital" and in fact used this as evidence to support their claim that Antonieta’s 8% share was
limited to the businesses enumerated therein. With regard to Antonieta’s claim in their other corporations and businesses, the
respondents said these should also be limited to the number of her shares as specified in the respective articles of incorporation. The
respondents denied using the partnership’s income to purchase the subject real properties and said that the certificates of title should
be binding on her.16

During the course of the trial at the RTC, petitioner Federico Jarantilla, Jr., who was one of the original defendants, entered into a
compromise agreement17 with Antonieta Jarantilla wherein he supported Antonieta’s claims and asserted that he too was entitled to
six percent (6%) of the supposed partnership in the same manner as Antonieta was. He prayed for a favorable judgment in this wise:

Defendant Federico Jarantilla, Jr., hereby joins in plaintiff’s prayer for an accounting from the other defendants, and the partition of
the properties of the co-ownership and the delivery to the plaintiff and to defendant Federico Jarantilla, Jr. of their rightful share of the
assets and properties in the co-ownership.181avvphi1

The RTC, in an Order19 dated March 25, 1992, approved the Joint Motion to Approve Compromise Agreement 20and on December 18,
1992, decided in favor of Antonieta, to wit:

WHEREFORE, premises above-considered, the Court renders judgment in favor of the plaintiff Antonieta Jarantilla and against
defendants Cynthia Remotigue, Doroteo Jarantilla and Tomas Jarantilla ordering the latter:

1. to deliver to the plaintiff her 8% share or its equivalent amount on the real properties covered by TCT Nos. 35655, 338398,
338399 & 335395, all of the Registry of Deeds of Quezon City; TCT Nos. (18303)23341, 142882 & 490007(4615), all of the
Registry of Deeds of Rizal; and TCT No. T-6309 of the Registry of Deeds of Cotabato based on their present market value;
2. to deliver to the plaintiff her 8% share or its equivalent amount on the Remotigue Agro-Industrial Corporation, Manila
Athletic Supply, Inc., MAS Rubber Products, Inc. and Buendia Recapping Corporation based on the shares of stocks present
book value;
3. to account for the assets and income of the co-ownership and deliver to plaintiff her rightful share thereof equivalent to
8%;
4. to pay plaintiff, jointly and severally, the sum of ₱50,000.00 as moral damages;
5. to pay, jointly and severally, the sum of ₱50,000.00 as attorney’s fees; and
6. to pay, jointly and severally, the costs of the suit.21
Both the petitioner and the respondents appealed this decision to the Court of Appeals. The petitioner claimed that the RTC "erred in
not rendering a complete judgment and ordering the partition of the co-ownership and giving to [him] six per centum (6%) of the
properties."22

While the Court of Appeals agreed to some of the RTC’s factual findings, it also established that Antonieta Jarantilla was not part of
the partnership formed in 1946, and that her 8% share was limited to the businesses enumerated in the Acknowledgement of
Participating Capital. On July 30, 2002, the Court of Appeals rendered the herein challenged decision setting aside the RTC’s decision,
as follows:

WHEREFORE, the decision of the trial court, dated 18 December 1992 is SET ASIDE and a new one is hereby entered ordering that:

(1) after accounting, plaintiff Antonieta Jarantilla be given her share of 8% in the assets and profits of Manila Athletic Supply,
Remotigue Trading in Iloilo City and Remotigue Trading in Cotabato City;
(2) after accounting, defendant Federico Jarantilla, Jr. be given his share of 6% of the assets and profits of the above-
mentioned enterprises; and, holding that
(3) plaintiff Antonieta Jarantilla is a stockholder in the following corporations to the extent stated in their Articles of
Incorporation:
(a) Rural Bank of Barotac Nuevo, Inc.;
(b) MAS Rubber Products, Inc.;
(c) Manila Athletic Supply, Inc.; and
(d) B. Remotigue Agro-Industrial Development Corp.
(4) No costs.23

The respondents, on August 20, 2002, filed a Motion for Partial Reconsideration but the Court of Appeals denied this in a
Resolution24 dated March 21, 2003.

Antonieta Jarantilla filed before this Court her own petition for review on certiorari25 dated September 16, 2002, assailing the Court of
Appeals’ decision on "similar grounds and similar assignments of errors as this present case" 26 but it was dismissed on November 20,
2002 for failure to file the appeal within the reglementary period of fifteen (15) days in accordance with Section 2, Rule 45 of the Rules
of Court.27

Petitioner filed before us this petition for review on the sole ground that:

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN NOT RULING THAT PETITIONER FEDERICO JARANTILLA,
JR. IS ENTITLED TO A SIX PER CENTUM (6%) SHARE OF THE OWNERSHIP OF THE REAL PROPERTIES ACQUIRED BY THE
OTHER DEFENDANTS USING COMMON FUNDS FROM THE BUSINESSES WHERE HE HAD OWNED SUCH SHARE. 28

Petitioner asserts that he was in a partnership with the Remotigue spouses, the Deocampo spouses, Rosita Jarantilla, Rafael
Jarantilla, Antonieta Jarantilla and Quintin Vismanos, as evidenced by the Acknowledgement of Participating Capital the Remotigue
spouses executed in 1957. He contends that from this partnership, several other corporations and businesses were established and
several real properties were acquired. In this petition, he is essentially asking for his 6% share in the subject real properties. He is
relying on the Acknowledgement of Participating Capital, on his own testimony, and Antonieta Jarantilla’s testimony to support this
contention.

The core issue is whether or not the partnership subject of the Acknowledgement of Participating Capital funded the subject real
properties. In other words, what is the petitioner’s right over these real properties?

It is a settled rule that in a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure, only questions of law may be
raised by the parties and passed upon by this Court.29

A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is a question of fact when the
doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law, the same must not involve an examination
of the probative value of the evidence presented by the litigants or any of them. The resolution of the issue must rest solely on what
the law provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the
question posed is one of fact. Thus, the test of whether a question is one of law or of fact is not the appellation given to such question
by the party raising the same; rather, it is whether the appellate court can determine the issue raised without reviewing or evaluating
the evidence, in which case, it is a question of law; otherwise it is a question of fact.30

Since the Court of Appeals did not fully adopt the factual findings of the RTC, this Court, in resolving the questions of law that are now
in issue, shall look into the facts only in so far as the two courts a quo differed in their appreciation thereof.

The RTC found that an unregistered partnership existed since 1946 which was affirmed in the 1957 document, the "Acknowledgement
of Participating Capital." The RTC used this as its basis for giving Antonieta Jarantilla an 8% share in the three businesses listed
therein and in the other businesses and real properties of the respondents as they had supposedly acquired these through funds from
the partnership.31

The Court of Appeals, on the other hand, agreed with the RTC as to Antonieta’s 8% share in the business enumerated in the
Acknowledgement of Participating Capital, but not as to her share in the other corporations and real properties. The Court of Appeals
ruled that Antonieta’s claim of 8% is based on the "Acknowledgement of Participating Capital," a duly notarized document which was
specific as to the subject of its coverage. Hence, there was no reason to pattern her share in the other corporations from her share in
the partnership’s businesses. The Court of Appeals also said that her claim in the respondents’ real properties was more "precarious"
as these were all covered by certificates of title which served as the best evidence as to all the matters contained therein. 32 Since
petitioner’s claim was essentially the same as Antonieta’s, the Court of Appeals also ruled that petitioner be given his 6% share in the
same businesses listed in the Acknowledgement of Participating Capital.

Factual findings of the trial court, when confirmed by the Court of Appeals, are final and conclusive except in the following cases: (1)
when the inference made is manifestly mistaken, absurd or impossible; (2) when there is a grave abuse of discretion; (3) when the
finding is grounded entirely on speculations, surmises or conjectures; (4) when the judgment of the Court of Appeals is based on
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went
beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) when the findings of the
Court of Appeals are contrary to those of the trial court; (8) when the findings of fact are conclusions without citation of specific
evidence on which they are based; (9) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the
parties and which, if properly considered, would justify a different conclusion; and (10) when the findings of fact of the Court of Appeals
are premised on the absence of evidence and are contradicted by the evidence on record.33

In this case, we find no error in the ruling of the Court of Appeals.

Both the petitioner and Antonieta Jarantilla characterize their relationship with the respondents as a co-ownership, but in the same
breath, assert that a verbal partnership was formed in 1946 and was affirmed in the 1957 Acknowledgement of Participating Capital.

There is a co-ownership when an undivided thing or right belongs to different persons.34 It is a partnership when two or more persons
bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among
themselves.35 The Court, in Pascual v. The Commissioner of Internal Revenue,36 quoted the concurring opinion of Mr. Justice Angelo
Bautista in Evangelista v. The Collector of Internal Revenue37 to further elucidate on the distinctions between a co-ownership and a
partnership, to wit:

I wish however to make the following observation: Article 1769 of the new Civil Code lays down the rule for determining when a
transaction should be deemed a partnership or a co-ownership. Said article paragraphs 2 and 3, provides;

(2) Co-ownership or co-possession does not itself establish a partnership, whether such co-owners or co-possessors do or
do not share any profits made by the use of the property;

(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a
joint or common right or interest in any property from which the returns are derived;

From the above it appears that the fact that those who agree to form a co- ownership share or do not share any profits made by the
use of the property held in common does not convert their venture into a partnership. Or the sharing of the gross returns does not of
itself establish a partnership whether or not the persons sharing therein have a joint or common right or interest in the property. This
only means that, aside from the circumstance of profit, the presence of other elements constituting partnership is necessary, such as
the clear intent to form a partnership, the existence of a juridical personality different from that of the individual partners, and the
freedom to transfer or assign any interest in the property by one with the consent of the others.

It is evident that an isolated transaction whereby two or more persons contribute funds to buy certain real estate for profit in the
absence of other circumstances showing a contrary intention cannot be considered a partnership.

Persons who contribute property or funds for a common enterprise and agree to share the gross returns of that enterprise in proportion
to their contribution, but who severally retain the title to their respective contribution, are not thereby rendered partners. They have no
common stock or capital, and no community of interest as principal proprietors in the business itself which the proceeds derived.

A joint purchase of land, by two, does not constitute a co-partnership in respect thereto; nor does an agreement to share the profits
and losses on the sale of land create a partnership; the parties are only tenants in common.

Where plaintiff, his brother, and another agreed to become owners of a single tract of realty, holding as tenants in common, and to
divide the profits of disposing of it, the brother and the other not being entitled to share in plaintiff’s commission, no partnership existed
as between the three parties, whatever their relation may have been as to third parties.
In order to constitute a partnership inter sese there must be: (a) An intent to form the same; (b) generally participating in both profits
and losses; (c) and such a community of interest, as far as third persons are concerned as enables each party to make contract,
manage the business, and dispose of the whole property. x x x.

The common ownership of property does not itself create a partnership between the owners, though they may use it for the purpose
of making gains; and they may, without becoming partners, agree among themselves as to the management, and use of such property
and the application of the proceeds therefrom.38 (Citations omitted.)

Under Article 1767 of the Civil Code, there are two essential elements in a contract of partnership: (a) an agreement to contribute
money, property or industry to a common fund; and (b) intent to divide the profits among the contracting parties. The first element is
undoubtedly present in the case at bar, for, admittedly, all the parties in this case have agreed to, and did, contribute money and
property to a common fund. Hence, the issue narrows down to their intent in acting as they did.39 It is not denied that all the parties in
this case have agreed to contribute capital to a common fund to be able to later on share its profits. They have admitted this fact,
agreed to its veracity, and even submitted one common documentary evidence to prove such partnership - the Acknowledgement of
Participating Capital.

As this case revolves around the legal effects of the Acknowledgement of Participating Capital, it would be instructive to examine the
pertinent portions of this document:

ACKNOWLEDGEMENT OF
PARTICIPATING CAPITAL

KNOW ALL MEN BY THESE PRESENTS:

That we, the spouses Buenaventura Remotigue and Conchita Jarantilla de Remotigue, both of legal age, Filipinos and residents of
Loyola Heights, Quezon City, P.I. hereby state:

That the Manila Athletic Supply at 712 Raon, Manila, the Remotigue Trading of Calle Real, Iloilo City and the Remotigue Trading,
Cotabato Branch, Cotabato, P.I., all dealing in athletic goods and equipments, and general merchandise are recorded in their
respective books with Buenaventura Remotigue as the registered owner and are being operated by them as such:

That they are not the only owners of the capital of the three establishments and their participation in the capital of the three
establishments together with the other co-owners as of the year 1952 are stated as follows:

1. Buenaventura Remotigue (TWENTY-FIVE THOUSAND)₱25,000.00

2. Conchita Jarantilla de Remotigue (TWENTY-FIVE THOUSAND)… 25,000.00

3. Vicencio Deocampo (FIFTEEN THOUSAND)…… 15,000.00

4. Rosita J. Deocampo (FIFTEEN THOUSAND)….... 15,000.00

5. Antonieta Jarantilla (EIGHT THOUSAND)……….. 8,000.00

6. Rafael Jarantilla (SIX THOUSAND)…………….. ... 6,000.00

7. Federico Jarantilla, Jr. (FIVE THOUSAND)……….. 5,000.00

8. Quintin Vismanos (TWO THOUSAND)…………... 2,000.00

That aside from the persons mentioned in the next preceding paragraph, no other person has any interest in the above-mentioned
three establishments.

IN WITNESS WHEREOF, they sign this instrument in the City of Manila, P.I., this 29th day of April, 1957.

[Sgd.]
BUENAVENTURA REMOTIGUE

[Sgd.]
CONCHITA JARANTILLA DE REMOTIGUE40
The Acknowledgement of Participating Capital is a duly notarized document voluntarily executed by Conchita Jarantilla-Remotigue
and Buenaventura Remotigue in 1957. Petitioner does not dispute its contents and is actually relying on it to prove his participation in
the partnership. Article 1797 of the Civil Code provides:

Art. 1797. The losses and profits shall be distributed in conformity with the agreement. If only the share of each partner in the profits
has been agreed upon, the share of each in the losses shall be in the same proportion.

In the absence of stipulation, the share of each partner in the profits and losses shall be in proportion to what he may have contributed,
but the industrial partner shall not be liable for the losses. As for the profits, the industrial partner shall receive such share as may be
just and equitable under the circumstances. If besides his services he has contributed capital, he shall also receive a share in the
profits in proportion to his capital. (Emphases supplied.)

It is clear from the foregoing that a partner is entitled only to his share as agreed upon, or in the absence of any such stipulations,
then to his share in proportion to his contribution to the partnership. The petitioner himself claims his share to be 6%, as stated in the
Acknowledgement of Participating Capital. However, petitioner fails to realize that this document specifically enumerated the
businesses covered by the partnership: Manila Athletic Supply, Remotigue Trading in Iloilo City and Remotigue Trading in Cotabato
City. Since there was a clear agreement that the capital the partners contributed went to the three businesses, then there is no reason
to deviate from such agreement and go beyond the stipulations in the document. Therefore, the Court of Appeals did not err in limiting
petitioner’s share to the assets of the businesses enumerated in the Acknowledgement of Participating Capital.

In Villareal v. Ramirez,41 the Court held that since a partnership is a separate juridical entity, the shares to be paid out to the partners
is necessarily limited only to its total resources, to wit:

Since it is the partnership, as a separate and distinct entity, that must refund the shares of the partners, the amount to be refunded is
necessarily limited to its total resources. In other words, it can only pay out what it has in its coffers, which consists of all its assets.
However, before the partners can be paid their shares, the creditors of the partnership must first be compensated. After all the creditors
have been paid, whatever is left of the partnership assets becomes available for the payment of the partners’ shares. 42

There is no evidence that the subject real properties were assets of the partnership referred to in the Acknowledgement of Participating
Capital.

The petitioner further asserts that he is entitled to respondents’ properties based on the concept of trust. He claims that since the
subject real properties were purchased using funds of the partnership, wherein he has a 6% share, then "law and equity mandates
that he should be considered as a co-owner of those properties in such proportion."43 In Pigao v. Rabanillo,44 this Court explained the
concept of trusts, to wit:

Express trusts are created by the intention of the trustor or of the parties, while implied trusts come into being by operation of law,
either through implication of an intention to create a trust as a matter of law or through the imposition of the trust irrespective of, and
even contrary to, any such intention. In turn, implied trusts are either resulting or constructive trusts. Resulting trusts are based on the
equitable doctrine that valuable consideration and not legal title determines the equitable title or interest and are presumed always to
have been contemplated by the parties. They arise from the nature or circumstances of the consideration involved in a transaction
whereby one person thereby becomes invested with legal title but is obligated in equity to hold his legal title for the benefit of another.45

On proving the existence of a trust, this Court held that:

Respondent has presented only bare assertions that a trust was created. Noting the need to prove the existence of a trust, this Court
has held thus:

"As a rule, the burden of proving the existence of a trust is on the party asserting its existence, and such proof must be clear and
satisfactorily show the existence of the trust and its elements. While implied trusts may be proved by oral evidence, the evidence must
be trustworthy and received by the courts with extreme caution, and should not be made to rest on loose, equivocal or indefinite
declarations. Trustworthy evidence is required because oral evidence can easily be fabricated." 46

The petitioner has failed to prove that there exists a trust over the subject real properties. Aside from his bare allegations, he has
failed to show that the respondents used the partnership’s money to purchase the said properties. Even assuming arguendo that
some partnership income was used to acquire these properties, the petitioner should have successfully shown that these funds came
from his share in the partnership profits. After all, by his own admission, and as stated in the Acknowledgement of Participating Capital,
he owned a mere 6% equity in the partnership.

In essence, the petitioner is claiming his 6% share in the subject real properties, by relying on his own self-serving testimony and the
equally biased testimony of Antonieta Jarantilla. Petitioner has not presented evidence, other than these unsubstantiated testimonies,
to prove that the respondents did not have the means to fund their other businesses and real properties without the partnership’s
income. On the other hand, the respondents have not only, by testimonial evidence, proven their case against the petitioner, but have
also presented sufficient documentary evidence to substantiate their claims, allegations and defenses. They presented preponderant
proof on how they acquired and funded such properties in addition to tax receipts and tax declarations.47 It has been held that "while
tax declarations and realty tax receipts do not conclusively prove ownership, they may constitute strong evidence of ownership when
accompanied by possession for a period sufficient for prescription."48 Moreover, it is a rule in this jurisdiction that testimonial evidence
cannot prevail over documentary evidence.49 This Court had on several occasions, expressed our disapproval on using mere self-
serving testimonies to support one’s claim. In Ocampo v. Ocampo,50 a case on partition of a co-ownership, we held that:

Petitioners assert that their claim of co-ownership of the property was sufficiently proved by their witnesses -- Luisa Ocampo-Llorin
and Melita Ocampo. We disagree. Their testimonies cannot prevail over the array of documents presented by Belen. A claim of
ownership cannot be based simply on the testimonies of witnesses; much less on those of interested parties, self-serving as they
are.51

It is true that a certificate of title is merely an evidence of ownership or title over the particular property described therein. Registration
in the Torrens system does not create or vest title as registration is not a mode of acquiring ownership; hence, this cannot deprive an
aggrieved party of a remedy in law.52 However, petitioner asserts ownership over portions of the subject real properties on the strength
of his own admissions and on the testimony of Antonieta Jarantilla.1avvphi1 As held by this Court in Republic of the Philippines v.
Orfinada, Sr.53:

Indeed, a Torrens title is generally conclusive evidence of ownership of the land referred to therein, and a strong presumption exists
that a Torrens title was regularly issued and valid. A Torrens title is incontrovertible against any informacion possessoria, of other title
existing prior to the issuance thereof not annotated on the Torrens title. Moreover, persons dealing with property covered by a Torrens
certificate of title are not required to go beyond what appears on its face. 54

As we have settled that this action never really was for partition of a co-ownership, to permit petitioner’s claim on these properties is
to allow a collateral, indirect attack on respondents’ admitted titles. In the words of the Court of Appeals, "such evidence cannot
overpower the conclusiveness of these certificates of title, more so since plaintiff’s [petitioner’s] claims amount to a collateral attack,
which is prohibited under Section 48 of Presidential Decree No. 1529, the Property Registration Decree." 55

SEC. 48. Certificate not subject to collateral attack. – A certificate of title shall not be subject to collateral attack. It cannot be altered,
modified, or cancelled except in a direct proceeding in accordance with law.

This Court has deemed an action or proceeding to be "an attack on a title when its objective is to nullify the title, thereby challenging
the judgment pursuant to which the title was decreed."56 In Aguilar v. Alfaro,57 this Court further distinguished between a direct and an
indirect or collateral attack, as follows:

A collateral attack transpires when, in another action to obtain a different relief and as an incident to the present action, an attack is
made against the judgment granting the title. This manner of attack is to be distinguished from a direct attack against a judgment
granting the title, through an action whose main objective is to annul, set aside, or enjoin the enforcement of such judgment if not yet
implemented, or to seek recovery if the property titled under the judgment had been disposed of. x x x.

Petitioner’s only piece of documentary evidence is the Acknowledgement of Participating Capital, which as discussed above, failed to
prove that the real properties he is claiming co-ownership of were acquired out of the proceeds of the businesses covered by such
document. Therefore, petitioner’s theory has no factual or legal leg to stand on.

WHEREFORE, the Petition is hereby DENIED and the Decision of the Court of Appeals in CA-G.R. CV No. 40887, dated July 30,
2002 is AFFIRMED. SO ORDERED.

3.

G.R. No. 85494. May 7, 1991.*

CHOITHRAM JETHMAL RAMNANI AND/OR NIRMLA V. RAMNANI AND MOTI G. RAMNANI, petitioners, vs. COURT OF APPEALS,
SPOUSES ISHWAR JETHMAL RAMNANI, SONYA JETHMAL RAMNANI and OVERSEAS HOLDING CO., LTD., respondents.

G.R. No. 85496. May 7, 1991.*

SPOUSES ISHWAR JETHMAL RAMNANI AND SONYA JETHMAL RAMNANI, petitioners, vs. THE HONORABLE COURT OF
APPEALS, ORTIGAS & CO., LTD. PARTNERSHIP, and OVERSEAS HOLDING CO., LTD., respondents.

GANCAYCO, J.:

This case involves the bitter quarrel of two brothers over two (2) parcels of land and its improvements now worth a fortune. The bone
of contention is the apparently conflicting factual findings of the trial court and the appellate court, the resolution of which will materially
affect the result of the contest.
The following facts are not disputed.

Ishwar, Choithram and Navalrai, all surnamed Jethmal Ramnani, are brothers of the full blood. Ishwar and his spouse Sonya had their
main business based in New York. Realizing the difficulty of managing their investments in the Philippines they executed a general
power of attorney on January 24, 1966 appointing Navalrai and Choithram as attorneys-in-fact, empowering them to manage and
conduct their business concern in the Philippines.1

On February 1, 1966 and on May 16, 1966, Choithram, in his capacity as aforesaid attorney-in-fact of Ishwar, entered into two
agreements for the purchase of two parcels of land located in Barrio Ugong, Pasig, Rizal, from Ortigas & Company, Ltd. Partnership
(Ortigas for short) with a total area of approximately 10,048 square meters. 2Per agreement, Choithram paid the down payment and
installments on the lot with his personal checks. A building was constructed thereon by Choithram in 1966 and this was occupied and
rented by Jethmal Industries and a wardrobe shop called Eppie's Creation. Three other buildings were built thereon by Choithram
through a loan of P100,000.00 obtained from the Merchants Bank as well as the income derived from the first building. The buildings
were leased out by Choithram as attorney-in-fact of Ishwar. Two of these buildings were later burned.

Sometime in 1970 Ishwar asked Choithram to account for the income and expenses relative to these properties during the period
1967 to 1970. Choithram failed and refused to render such accounting. As a consequence, on February 4, 1971, Ishwar revoked the
general power of attorney. Choithram and Ortigas were duly notified of such revocation on April 1, 1971 and May 24, 1971,
respectively.3 Said notice was also registered with the Securities and Exchange Commission on March 29, 1971 4 and was published
in the April 2, 1971 issue of The Manila Times for the information of the general public.5

Nevertheless, Choithram as such attorney-in-fact of Ishwar, transferred all rights and interests of Ishwar and Sonya in favor of his
daughter-in-law, Nirmla Ramnani, on February 19, 1973. Her husband is Moti, son of Choithram. Upon complete payment of the lots,
Ortigas executed the corresponding deeds of sale in favor of Nirmla. 6 Transfer Certificates of Title Nos. 403150 and 403152 of the
Register of Deeds of Rizal were issued in her favor.

Thus, on October 6, 1982, Ishwar and Sonya (spouses Ishwar for short) filed a complaint in the Court of First Instance of Rizal against
Choithram and/or spouses Nirmla and Moti (Choithram et al. for brevity) and Ortigas for reconveyance of said properties or payment
of its value and damages. An amended complaint for damages was thereafter filed by said spouses.

After the issues were joined and the trial on the merits, a decision was rendered by the trial court on December 3, 1985 dismissing
the complaint and counterclaim. A motion for reconsideration thereof filed by spouses Ishwar was denied on March 3, 1986.

An appeal therefrom was interposed by spouses Ishwar to the Court of Appeals wherein in due course a decision was promulgated
on March 14, 1988, the dispositive part of which reads as follows:

WHEREFORE, judgment is hereby rendered reversing and setting aside the appealed decision of the lower court dated
December 3, 1985 and the Order dated March 3, 1986 which denied plaintiffs-appellants' Motion for Reconsideration from
aforesaid decision. A new decision is hereby rendered sentencing defendants- appellees Choithram Jethmal Ramnani,
Nirmla V. Ramnani, Moti C. Ramnani, and Ortigas and Company Limited Partnership to pay, jointly and severally, plaintiffs-
appellants the following:

1. Actual or compensatory damages to the extent of the fair market value of the properties in question and all improvements
thereon covered by Transfer Certificate of Title No. 403150 and Transfer Certificate of Title No. 403152 of the Registry of
Deeds of Rizal, prevailing at the time of the satisfaction of the judgment but in no case shall such damages be less than the
value of said properties as appraised by Asian Appraisal, Inc. in its Appraisal Report dated August 1985 (Exhibits T to T-
14, inclusive).

2. All rental incomes paid or ought to be paid for the use and occupancy of the properties in question and all improvements
thereon consisting of buildings, and to be computed as follows:

a) On Building C occupied by Eppie's Creation and Jethmal Industries from 1967 to 1973, inclusive, based on the
1967 to 1973 monthly rentals paid by Eppie's Creation;

b) Also on Building C above, occupied by Jethmal Industries and Lavine from 1974 to 1978, the rental incomes
based on then rates prevailing as shown under Exhibit "P"; and from 1979 to 1981, based on then prevailing rates
as indicated under Exhibit "Q";

c) On Building A occupied by Transworld Knitting Mills from 1972 to 1978, the rental incomes based upon then
prevailing rates shown under Exhibit "P", and from 1979 to 1981, based on prevailing rates per Exhibit "Q";

d) On the two Bays Buildings occupied by Sigma-Mariwasa from 1972 to 1978, the rentals based on the Lease
Contract, Exhibit "P", and from 1979 to 1980, the rentals based on the Lease Contract, Exhibit "Q",
 and thereafter commencing 1982, to account for and turn over the rental incomes paid or ought to be paid for the use and
occupancy of the properties and all improvements totalling 10,048 sq. m based on the rate per square meter prevailing in
1981 as indicated annually cumulative up to 1984. Then, commencing 1985 and up to the satisfaction of the judgment,
rentals shall be computed at ten percent (10%) annually of the fair market values of the properties as appraised by the
Asian Appraisal, Inc. in August 1985 (Exhibits T to T-14, inclusive.)

3. Moral damages in the sum of P200,000.00;

4. Exemplary damages in the sum of P100,000.00;
5. Attorney's fees equivalent to 10% of the award herein made;
6. Legal interest on the total amount awarded computed from first demand in 1967 and until the full amount is paid and
satisfied; and
7. The cost of suit.7

Acting on a motion for reconsideration filed by Choithram, et al. and Ortigas, the appellate court promulgated an amended decision
on October 17, 1988 granting the motion for reconsideration of Ortigas by affirming the dismissal of the case by the lower court as
against Ortigas but denying the motion for reconsideration of Choithram, et al. 8

Choithram, et al. thereafter filed a petition for review of said judgment of the appellate court alleging the following grounds:

1. The Court of Appeals gravely abused its discretion in making a factual finding not supported by and contrary, to the
evidence presented at the Trial Court.

2. The Court of Appeals acted in excess of jurisdiction in awarding damages based on the value of the real properties in
question where the cause of action of private respondents is recovery of a sum of money.

ARGUMENTS

I THE COURT OF APPEALS ACTED IN GRAVE ABUSE OF ITS DISCRETION IN MAKING A FACTUAL FINDING THAT
PRIVATE RESPONDENT ISHWAR REMITTED THE AMOUNT OF US $150,000.00 TO PETITIONER CHOITHRAM IN
THE ABSENCE OF PROOF OF SUCH REMITTANCE.

II THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND MANIFEST PARTIALITY IN
DISREGARDING THE TRIAL COURTS FINDINGS BASED ON THE DIRECT DOCUMENTARY AND TESTIMONIAL
EVIDENCE PRESENTED BY CHOITHRAM IN THE TRIAL COURT ESTABLISHING THAT THE PROPERTIES WERE
PURCHASED WITH PERSONAL FUNDS OF PETITIONER CHOITHRAM AND NOT WITH MONEY ALLEGEDLY
REMITTED BY RESPONDENT ISHWAR.

III THE COURT OF APPEALS ACTED IN EXCESS OF JURISDICTION IN AWARDING DAMAGES BASED ON THE
VALUE OF THE PROPERTIES AND THE FRUITS OF THE IMPROVEMENTS THEREON. 9

Similarly, spouses Ishwar filed a petition for review of said amended decision of the appellate court exculpating Ortigas of liability
based on the following assigned errors

THE RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR AND HAS DECIDED A
QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND/OR WITH APPLICABLE DECISIONS OF THIS
HONORABLE COURT—

A) IN PROMULGATING THE QUESTIONED AMENDED DECISION (ANNEX "A") RELIEVING RESPONDENT

ORTIGAS FROM LIABILITY AND DISMISSING PETITIONERS' AMENDED COMPLAINT IN CIVIL CASE NO.
534-P, AS AGAINST SAID RESPONDENT ORTIGAS;

B) IN HOLDING IN SAID AMENDED DECISION THAT AT ANY RATE NO ONE EVER TESTIFIED THAT
ORTIGAS WAS A SUBSCRIBER TO THE MANILA TIMES PUBLICATION OR THAT ANY OF ITS OFFICERS
READ THE NOTICE AS PUBLISHED IN THE MANILA TIMES, THEREBY ERRONEOUSLY CONCLUDING
THAT FOR RESPONDENT ORTIGAS TO BE CONSTRUCTIVELY BOUND BY THE PUBLISHED NOTICE OF
REVOCATION, ORTIGAS AND/OR ANY OF ITS OFFICERS MUST BE A SUBSCRIBER AND/OR THAT ANY
OF ITS OFFICERS SHOULD READ THE NOTICE AS ACTUALLY PUBLISHED;

C) IN HOLDING IN SAID AMENDED DECISION THAT ORTIGAS COULD NOT BE HELD LIABLE JOINTLY AND
SEVERALLY WITH THE DEFENDANTS-APPELLEES CHOITHRAM, MOTI AND NIRMLA RAMNANI, AS
 ORTIGAS RELIED ON THE WORD OF CHOITHRAM THAT ALL ALONG HE WAS ACTING FOR AND IN
BEHALF OF HIS BROTHER ISHWAR WHEN IT TRANSFERRED THE RIGHTS OF THE LATTER TO NIRMLA
V. RAMNANI;

D) IN IGNORING THE EVIDENCE DULY PRESENTED AND ADMITTED DURING THE TRIAL THAT ORTIGAS
WAS PROPERLY NOTIFIED OF THE NOTICE OF REVOCATION OF THE GENERAL POWER OF ATTORNEY
GIVEN TO CHOITHRAM, EVIDENCED BY THE PUBLICATION IN THE MANILA TIMES ISSUE OF APRIL 2,
1971 (EXH. F) WHICH CONSTITUTES NOTICE TO THE WHOLE WORLD; THE RECEIPT OF THE NOTICE
OF SUCH REVOCATION WHICH WAS SENT TO ORTIGAS ON MAY 22, 1971 BY ATTY. MARIANO P.
MARCOS AND RECEIVED BY ORTIGAS ON MAY 24, 1971 (EXH. G) AND THE FILING OF THE NOTICE WITH
THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 29,1971 (EXH. H);

E) IN DISCARDING ITS FINDINGS CONTAINED IN ITS DECISION OF 14 MARCH 1988 (ANNEX B) THAT
ORTIGAS WAS DULY NOTIFIED OF THE REVOCATION OF THE POWER OF ATTORNEY OF CHOITHRAM,
HENCE ORTIGAS ACTED IN BAD FAITH IN EXECUTING THE DEED OF SALE TO THE PROPERTIES IN
QUESTION IN FAVOR OF NIRMLA V. RAMNANI;

F) IN SUSTAINING RESPONDENT ORTIGAS VACUOUS REHASHED ARGUMENTS IN ITS MOTION FOR

RECONSIDERATION THAT IT WOULD NOT GAIN ONE CENTAVO MORE FROM CHOITHRAM FOR THE
SALE OF SAID LOTS AND THE SUBSEQUENT TRANSFER OF THE SAME TO THE MATTER'S DAUGHTER-
IN-LAW, AND THAT IT WAS IN GOOD FAITH WHEN IT TRANSFERRED ISHWAR'S RIGHTS TO THE LOTS
IN QUESTION.

II

THE RESPONDENT HONORABLE COURT OF APPEALS HAS SO FAR DEPARTED FROM THE ACCEPTED AND
USUAL COURSE OF JUDICIAL PROCEEDING WHEN IT HELD IN THE QUESTIONED AMENDED DECISION OF 17
NOVEMBER 1988 (ANNEX A) THAT RESPONDENT ORTIGAS & CO., LTD., IS NOT JOINTLY AND SEVERALLY LIABLE
WITH DEFENDANTS-APPELLEES CHOITHRAM, MOTI AND NIRMLA RAMNANI IN SPITE OF ITS ORIGINAL DECISION
OF 14 MARCH 1988 THAT ORTIGAS WAS DULY NOTIFIED OF THE REVOCATION OF THE POWER OF ATTORNEY
OF CHOITHRAM RAMNANI.10

The center of controversy is the testimony of Ishwar that during the latter part of 1965, he sent the amount of US $150,000.00 to
Choithram in two bank drafts of US$65,000.00 and US$85,000.00 for the purpose of investing the same in real estate in the
Philippines. The trial court considered this lone testimony unworthy of faith and credit. On the other hand, the appellate court found
that the trial court misapprehended the facts in complete disregard of the evidence, documentary and testimonial.

Another crucial issue is the claim of Choithram that because he was then a British citizen, as a temporary arrangement, he arranged
the purchase of the properties in the name of Ishwar who was an American citizen and who was then qualified to purchase property
in the Philippines under the then Parity Amendment. The trial court believed this account but it was debunked by the appellate court.

As to the issue of whether of not spouses Ishwar actually sent US$150,000.00 to Choithram precisely to be used in the real estate
business, the trial court made the following disquisition —

After a careful, considered and conscientious examination of the evidence adduced in the case at bar, plaintiff Ishwar
Jethmal Ramanani's main evidence, which centers on the alleged payment by sending through registered mail from New
York two (2) US$ drafts of $85,000.00 and $65,000.00 in the latter part of 1965 (TSN 28 Feb. 1984, p. 10-11). The sending
of these moneys were before the execution of that General Power of Attorney, which was dated in New York, on January
24, 1966. Because of these alleged remittances of US $150,000.00 and the subsequent acquisition of the properties in
question, plaintiffs averred that they constituted a trust in favor of defendant Choithram Jethmal Ramnani. This Court can
be in full agreement if the plaintiffs were only able to prove preponderantly these remittances. The entire record of this case
is bereft of even a shred of proof to that effect. It is completely barren. His uncorroborated testimony that he remitted these
amounts in the "later part of 1965" does not engender enough faith and credence. Inadequacy of details of such remittance
on the two (2) US dollar drafts in such big amounts is completely not positive, credible, probable and entirely not in accord
with human experience. This is a classic situation, plaintiffs not exhibiting any commercial document or any document and/or
paper as regard to these alleged remittances. Plaintiff Ishwar Ramnani is not an ordinary businessman in the strict sense
of the word. Remember his main business is based in New York, and he should know better how to send these alleged
remittances. Worst, plaintiffs did not present even a scum of proof, that defendant Choithram Ramnani received the alleged
two US dollar drafts. Significantly, he does not know even the bank where these two (2) US dollar drafts were purchased.
Indeed, plaintiff Ishwar Ramnani's lone testimony is unworthy of faith and credit and, therefore, deserves scant
consideration, and since the plaintiffs' theory is built or based on such testimony, their cause of action collapses or falls with
it.

Further, the rate of exchange that time in 1966 was P4.00 to $1.00. The alleged two US dollar drafts amounted to
$150,000.00 or about P600,000.00. Assuming the cash price of the two (2) lots was only P530,000.00 (ALTHOUGH he
 said: "Based on my knowledge I have no evidence," when asked if he even knows the cash price of the two lots). If he were
really the true and bonafide investor and purchaser for profit as he asserted, he could have paid the price in full in cash
directly and obtained the title in his name and not thru "Contracts To Sell" in installments paying interest and thru an attorney-
in fact (TSN of May 2, 1984, pp. 10-11) and, again, plaintiff Ishwar Ramnani told this Court that he does not know whether
or not his late father-in-law borrowed the two US dollar drafts from the Swiss Bank or whether or not his late father-in-law
had any debit memo from the Swiss Bank (TSN of May 2, 1984, pp. 9-10).11

On the other hand, the appellate court, in giving credence to the version of Ishwar, had this to say —

While it is true, that generally the findings of fact of the trial court are binding upon the appellate courts, said rule admits of
exceptions such as when (1) the conclusion is a finding grounded entirely on speculations, surmises and conjectures; (2)
when the inferences made is manifestly mistaken, absurd and impossible; (3) when there is grave abuse of discretion; (4)
when the judgment is based on a misapprehension of facts and when the court, in making its findings, went beyond the
issues of the case and the same are contrary to the admissions of both appellant and appellee (Ramos vs. Court of Appeals,
63 SCRA 33; Philippine American Life Assurance Co. vs. Santamaria, 31 SCRA 798; Aldaba vs. Court of Appeals, 24 SCRA
189).

The evidence on record shows that the t court acted under a misapprehension of facts and the inferences made on the
evidence palpably a mistake.

The trial court's observation that "the entire records of the case is bereft of even a shred of proof" that plaintiff-appellants
have remitted to defendant-appellee Choithram Ramnani the amount of US $ 150,000.00 for investment in real estate in
the Philippines, is not borne by the evidence on record and shows the trial court's misapprehension of the facts if not a
complete disregard of the evidence, both documentary and testimonial.

Plaintiff-appellant Ishwar Jethmal Ramnani testifying in his own behalf, declared that during the latter part of 1965, he sent
the amount of US $150,000.00 to his brother Choithram in two bank drafts of US $65,000.00 and US $85,000.00 for the
purpose of investing the same in real estate in the Philippines. His testimony is as follows:

ATTY. MARAPAO:
Mr. Witness, you said that your attorney-in-fact paid in your behalf. Can you tell this Honorable Court where your
attorney-in-fact got the money to pay this property?
ATTY. CRUZ:
Wait. It is now clear it becomes incompetent or hearsay.
COURT:
Witness can answer.
A I paid through my attorney-in-fact. I am the one who gave him the money.
ATTY. MARAPAO:
Q You gave him the money?
A That's right.
Q How much money did you give him?
A US $ 150,000.00.
Q How was it given then?
A Through Bank drafts. US $65,000.00 and US $85,000.00 bank drafts. The total amount which is $ 150,000.00
(TSN, 28 February 1984, p. 10; Emphasis supplied.)
xxx xxx xxx
ATTY. CRUZ:
Q The two bank drafts which you sent I assume you bought that from some banks in New York?
A No, sir.
Q But there is no question those two bank drafts were for the purpose of paying down payment and installment
of the two parcels of land?
A Down payment, installment and to put up the building.
Q I thought you said that the buildings were constructed . . . subject to our continuing objection from rentals of
first building?
ATTY. MARAPAO:
Your Honor, that is misleading.
COURT;
Witness (may) answer.
A Yes, the first building was immediately put up after the purchase of the two parcels of land that was in 1966
and the finds were used for the construction of the building from the US $150,000.00 (TSN, 7 March 1984, page
14; Emphasis supplied.)
xxx xxx xxx
Q These two bank drafts which you mentioned and the use for it you sent them by registered mail, did you send
them from New Your?
A That is right.
Q And the two bank drafts which were put in the registered mail, the registered mail was addressed to whom?
A Choithram Ramnani. (TSN, 7 March 1984, pp. 14-15).
 On cross-examination, the witness reiterated the remittance of the money to his brother Choithram, which was sent to him
by his father-in-law, Rochiram L. Mulchandoni from Switzerland, a man of immense wealth, which even defendants-
appellees' witness Navalrai Ramnani admits to be so (tsn., p. 16, S. Oct. 13, 1985). Thus, on cross-examination, Ishwar
testified as follows:
Q How did you receive these two bank drafts from the bank the name of which you cannot remember?
A I got it from my father-in-law.
Q From where did your father- in-law sent these two bank drafts?
A From Switzerland.
Q He was in Switzerland.
A Probably, they sent out these two drafts from Switzerland.

(TSN, 7 March 1984, pp. 16-17; Emphasis supplied.)

This positive and affirmative testimony of plaintiff-appellant that he sent the two (2) bank drafts totalling US $ 150,000.00 to
his brother, is proof of said remittance. Such positive testimony has greater probative force than defendant-appellee's denial
of receipt of said bank drafts, for a witness who testifies affirmatively that something did happen should be believed for it is
unlikely that a witness will remember what never happened (Underhill's Cr. Guidance, 5th Ed., Vol. 1, pp. 10-11).

That is not all. Shortly thereafter, plaintiff-appellant Ishwar Ramnani executed a General Power of Attorney (Exhibit "A")
dated January 24, 1966 appointing his brothers, defendants-appellees Navalrai and Choithram as attorney-in-fact
empowering the latter to conduct and manage plaintiffs-appellants' business affairs in the Philippines and specifically—

No. 14. To acquire, purchase for us, real estates and improvements for the purpose of real estate business
anywhere in the Philippines and to develop, subdivide, improve and to resell to buying public (individual, firm or
corporation); to enter in any contract of sale in oar behalf and to enter mortgages between the vendees and the
herein grantors that may be needed to finance the real estate business being undertaken.

Pursuant thereto, on February 1, 1966 and May 16, 1966, Choithram Jethmal Ramnani entered into Agreements
(Exhibits "B' and "C") with the other defendant. Ortigas and Company, Ltd., for the purchase of two (2) parcels of land
situated at Barrio Ugong, Pasig, Rizal, with said defendant-appellee signing the Agreements in his capacity as Attorney-in-
fact of Ishwar Jethmal Ramnani.

Again, on January 5, 1972, almost seven (7) years after Ishwar sent the US $ 150,000.00 in 1965, Choithram Ramnani, as
attorney-in fact of Ishwar entered into a Contract of Lease with Sigma-Mariwasa (Exhibit "P") thereby re-affirming the
ownership of Ishwar over the disputed property and the trust relationship between the latter as principal and Choithram as
attorney-in-fact of Ishwar.

All of these facts indicate that if plaintiff-appellant Ishwar had not earlier sent the US $ 150,000.00 to his brother, Choithram,
there would be no purpose for him to execute a power of attorney appointing his brothers as s attorney-in-fact in buying real
estate in the Philippines.

As against Choithram's denial that he did not receive the US $150,000.00 remitted by Ishwar and that the Power of Attorney,
as well as the Agreements entered into with Ortigas & Co., were only temporary arrangements, Ishwar's testimony that he
did send the bank drafts to Choithram and was received by the latter, is the more credible version since it is natural,
reasonable and probable. It is in accord with the common experience, knowledge and observation of ordinary men (Gardner
vs. Wentors 18 Iowa 533). And in determining where the superior weight of the evidence on the issues involved lies, the
court may consider the probability or improbability of the testimony of the witness (Sec. 1, Rule 133, Rules of Court).

Contrary, therefore, to the trial court's sweeping observation that 'the entire records of the case is bereft of even a shred of
proof that Choithram received the alleged bank drafts amounting to US $ 150,000.00, we have not only testimonial evidence
but also documentary and circumstantial evidence proving said remittance of the money and the fiduciary relationship
between the former and Ishwar.12

The Court agrees. The environmental circumstances of this case buttress the claim of Ishwar that he did entrust the amount of US $
150,000.00 to his brother, Choithram, which the latter invested in the real property business subject of this litigation in his capacity as
attorney-in-fact of Ishwar.

True it is that there is no receipt whatever in the possession of Ishwar to evidence the same, but it is not unusual among brothers and
close family members to entrust money and valuables to each other without any formalities or receipt due to the special relationship
of trust between them.

And another proof thereof is the fact that Ishwar, out of frustration when Choithram failed to account for the realty business despite
his demands, revoked the general power of attorney he extended to Choithram and Navalrai. Thereafter, Choithram wrote a letter to
Ishwar pleading that the power of attorney be renewed or another authority to the same effect be extended, which reads as follows:
 June 25,1971

MR. ISHWAR JETHMAL NEW YORK

(1) Send power of Atty. immediately, because the case has been postponed for two weeks. The same way as it has been
send before in favor of both names. Send it immediately otherwise everything will be lost unnecessarily, and then it will take
us in litigation. Now that we have gone ahead with a case and would like to end it immediately otherwise squatters will take
the entire land. Therefore, send it immediately.

(2) Ortigas also has sued us because we are holding the installments, because they have refused to give a rebate of P5.00
per meter which they have to give us as per contract. They have filed the law suit that since we have not paid the installment
they should get back the land. The hearing of this case is in the month of July. Therefore, please send the power
immediately. In one case DADA (Elder Brother) will represent and in another one, I shall.

(3) In case if you do not want to give power then make one letter in favor of Dada and the other one in my favor showing
that in any litigation we can represent you and your wife, and whatever the court decide it will be acceptable by me. You
can ask any lawyer, he will be able to prepare these letters. After that you can have these letters ratify before P.I. Consulate.
It should be dated April 15, 1971.

(4) Try to send the power because it will be more useful. Make it in any manner whatever way you have confident in it. But
please send it immediately.

You have cancelled the power. Therefore, you have lost your reputation everywhere. What can I further write you about it. I have told
everybody that due to certain reasons I have written you to do this that is why you have done this. This way your reputation have been
kept intact. Otherwise if I want to do something about it, I can show you that inspite of the power you have cancelled you can not do
anything. You can keep this letter because my conscience is clear. I do not have anything in my mind.

I should not be writing you this, but because my conscience is clear do you know that if I had predated papers what could you have
done? Or do you know that I have many paper signed by you and if had done anything or do then what can you do about it? It is not
necessary to write further about this. It does not matter if you have cancelled the power. At that time if I had predated and done
something about it what could you have done? You do not know me. I am not after money. I can earn money anytime. It has been ten
months since I have not received a single penny for expenses from Dada (elder brother). Why there are no expenses? We can not
draw a single penny from knitting (factory). Well I am not going to write you further, nor there is any need for it. This much I am writing
you because of the way you have conducted yourself. But remember, whenever I hale the money I will not keep it myself Right now I
have not got anything at all.

I am not going to write any further.

Keep your business clean with Naru. Otherwise he will discontinue because he likes to keep his business very clean. 13

The said letter was in Sindhi language. It was translated to English by the First Secretary of the Embassy of Pakistan, which translation
was verified correct by the Chairman, Department of Sindhi, University of Karachi.14

From the foregoing letter what could be gleaned is that—

1. Choithram asked for the issuance of another power of attorney in their favor so they can continue to represent Ishwar as
Ortigas has sued them for unpaid installments. It also appears therefrom that Ortigas learned of the revocation of the power
of attorney so the request to issue another.

2. Choithram reassured Ishwar to have confidence in him as he was not after money, and that he was not interested in
Ishwar's money.

3. To demonstrate that he can be relied upon, he said that he could have ante-dated the sales agreement of the Ortigas
lots before the issuance of the powers of attorney and acquired the same in his name, if he wanted to, but he did not do so.

4. He said he had not received a single penny for expenses from Dada (their elder brother Navalrai). Thus, confirming that
if he was not given money by Ishwar to buy the Ortigas lots, he could not have consummated the sale.

5. It is important to note that in said letter Choithram never claimed ownership of the property in question. He affirmed the
fact that he bought the same as mere agent and in behalf of Ishwar. Neither did he mention the alleged temporary
arrangement whereby Ishwar, being an American citizen, shall appear to be the buyer of the said property, but that after
Choithram acquires Philippine citizenship, its ownership shall be transferred to Choithram.
This brings us to this temporary arrangement theory of Choithram.

The appellate court disposed of this matter in this wise

Choithram's claim that he purchased the two parcels of land for himself in 1966 but placed it in the name of his younger
brother, Ishwar, who is an American citizen, as a temporary arrangement,' because as a British subject he is disqualified
under the 1935 Constitution to acquire real property in the Philippines, which is not so with respect to American citizens in
view of the Ordinance Appended to the Constitution granting them parity rights, there is nothing in the records showing that
Ishwar ever agreed to such a temporary arrangement.

During the entire period from 1965, when the US $ 150,000. 00 was transmitted to Choithram, and until Ishwar filed a
complaint against him in 1982, or over 16 years, Choithram never mentioned of a temporary arrangement nor can he present
any memorandum or writing evidencing such temporary arrangement, prompting plaintiff-appellant to observe:

The properties in question which are located in a prime industrial site in Ugong, Pasig, Metro Manila have a
present fair market value of no less than P22,364,000.00 (Exhibits T to T-14, inclusive), and yet for such valuable
pieces of property, Choithram who now belatedly that he purchased the same for himself did not document in
writing or in a memorandum the alleged temporary arrangement with Ishwar' (pp. 4-41, Appellant's Brief).

Such verbal allegation of a temporary arrangement is simply improbable and inconsistent. It has repeatedly been held that
important contracts made without evidence are highly improbable.

The improbability of such temporary arrangement is brought to fore when we consider that Choithram has a son (Haresh
Jethmal Ramnani) who is an American citizen under whose name the properties in question could be registered, both during
the time the contracts to sell were executed and at the time absolute title over the same was to be delivered. At the time the
Agreements were entered into with defendant Ortigas & Co. in 1966, Haresh, was already 18 years old and consequently,
Choithram could have executed the deeds in trust for his minor son. But, he did not do this. Three (3) years, thereafter, or
in 1968 after Haresh had attained the age of 21, Choithram should have terminated the temporary arrangement with Ishwar,
which according to him would be effective only pending the acquisition of citizenship papers. Again, he did not do anything.

Evidence to be believed, said Vice Chancellor Van Fleet of New Jersey, must not only proceed from the mouth
of a credible witness, but it must be credible in itself—such as the common experience and observation of mankind
can approve as probable under the circumstances. We have no test of the truth of human testimony, except its
conformity to our knowledge, observation and experience. Whatever is repugnant to these belongs to the
miraculous and is outside of judicial cognizance. (Daggers vs. Van Dyek 37 M.J. Eq. 130, 132).

Another factor that can be counted against the temporary arrangement excuse is that upon the revocation on February 4,
1971 of the Power of attorney dated January 24, 1966 in favor of Navalrai and Choithram by Ishwar, Choithram wrote (tsn,
p. 21, S. July 19, 1985) a letter dated June 25, 1971 (Exhibits R, R-1, R-2 and R-3) imploring Ishwar to execute a new power
of attorney in their favor. That if he did not want to give power, then Ishwar could make a letter in favor of Dada and another
in his favor so that in any litigation involving the properties in question, both of them could represent Ishwar and his wife.
Choithram tried to convince Ishwar to issue the power of attorney in whatever manner he may want. In said letter no mention
was made at all of any temporary arrangement.

On the contrary, said letter recognize(s) the existence of principal and attorney-in-fact relationship between Ishwar and
himself. Choithram wrote: . . . do you know that if I had predated papers what could you have done? Or do you know that I
have many papers signed by you and if I had done anything or do then what can you do about it?' Choithram was saying
that he could have repudiated the trust and ran away with the properties of Ishwar by predating documents and Ishwar
would be entirely helpless. He was bitter as a result of Ishwar's revocation of the power of attorney but no mention was
made of any temporary arrangement or a claim of ownership over the properties in question nor was he able to present any
memorandum or document to prove the existence of such temporary arrangement.

Choithram is also estopped in pais or by deed from claiming an interest over the properties in question adverse to that of
Ishwar. Section 3(a) of Rule 131 of the Rules of Court states that whenever a party has, by his own declaration, act, or
omission intentionally and deliberately led another to believe a particular thing true and act upon such belief, he cannot in
any litigation arising out of such declaration, act or omission be permitted to falsify it.' While estoppel by deed is a bar which
precludes a party to a deed and his privies from asserting as against the other and his privies any right of title in derogation
of the deed, or from denying the truth of any material fact asserted in it (31 C.J.S. 195; 19 Am. Jur. 603).

Thus, defendants-appellees are not permitted to repudiate their admissions and representations or to assert any right or
title in derogation of the deeds or from denying the truth of any material fact asserted in the (1) power of attorney dated
January 24, 1966 (Exhibit A); (2) the Agreements of February 1, 1966 and May 16, 1966 (Exhibits B and C); and (3) the
Contract of Lease dated January 5, 1972 (Exhibit P).
 . . . The doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and justice, and
its purpose is to forbid one to speak against his own act, representations, or commitments to the injury of one to
whom they were directed and who reasonably relied thereon. The doctrine of estoppel springs from equitable
principles and the equities in the case. It is designed to aid the law in the administration of justice where without
its aid injustice might result. It has been applied by court wherever and whenever special circumstances of a case
so demands' (Philippine National Bank vs. Court of Appeals, 94 SCRA 357, 368 [1979]).

It was only after the services of counsel has been obtained that Choithram alleged for the first time in his Answer that the
General Power of attorney (Annex A) with the Contracts to Sell (Annexes B and C) were made only for the sole purpose of
assuring defendants' acquisition and ownership of the lots described thereon in due time under the law; that said instruments
do not reflect the true intention of the parties (par. 2, Answer dated May 30, 1983), seventeen (17) long years from the time
he received the money transmitted to him by his brother, Ishwar.

Moreover, Choithram's 'temporary arrangement,' by which he claimed purchasing the two (2) parcels in question in 1966
and placing them in the name of Ishwar who is an American citizen, to circumvent the disqualification provision of aliens
acquiring real properties in the Philippines under the 1935 Philippine Constitution, as Choithram was then a British subject,
show a palpable disregard of the law of the land and to sustain the supposed "temporary arrangement" with Ishwar would
be sanctioning the perpetration of an illegal act and culpable violation of the Constitution.

Defendants-appellees likewise violated the Anti-Dummy Law (Commonwealth Act 108, as amended), which provides in
Section 1 thereof that:

In all cases in which any constitutional or legal provision requires Philippine or any other specific citizenship as a
requisite for the exercise or enjoyment of a right, franchise or privilege, . . . any alien or foreigner profiting thereby,
shall be punished . . . by imprisonment . . . and of a fine of not less than the value of the right, franchise or
privileges, which is enjoyed or acquired in violation of the provisions hereof . . .

Having come to court with unclean hands, Choithram must not be permitted foist his 'temporary arrangement' scheme as a
defense before this court. Being in delicto, he does not have any right whatsoever being shielded from his own wrong-doing,
which is not so with respect to Ishwar, who was not a party to such an arrangement.

The falsity of Choithram's defense is further aggravated by the material inconsistencies and contradictions in his testimony.
While on January 23, 1985 he testified that he purchased the land in question on his own behalf (tsn, p. 4, S. Jan. 23, 1985),
in the July 18, 1985 hearing, forgetting probably what he stated before, Choithram testified that he was only an attorney-in-
fact of Ishwar (tsn, p. 5, S. July 18, 1985). Also in the hearing of January 23, 1985, Choithram declared that nobody rented
the building that was constructed on the parcels of land in question (tsn, pp. 5 and 6), only to admit in the hearing of October
30, 1985, that he was in fact renting the building for P12,000. 00 per annum (tsn, p. 3). Again, in the hearing of July 19,
1985, Choithram testified that he had no knowledge of the revocation of the Power of Attorney (tsn, pp. 20- 21), only to
backtrack when confronted with the letter of June 25, 1971 (Exhibits R to R-3), which he admitted to be in "his own writing,"
indicating knowledge of the revocation of the Power of Attorney.

These inconsistencies are not minor but go into the entire credibility of the testimony of Choithram and the rule is that
contradictions on a very crucial point by a witness, renders s testimony incredible People vs. Rafallo, 80 Phil. 22). Not only
this the doctrine of falsus in uno, falsus in omnibus is fully applicable as far as the testimony of Choithram is concerned.
The cardinal rule, which has served in all ages, and has been applied to all conditions of men, is that a witness willfully
falsifying the truth in one particular, when upon oath, ought never to be believed upon the strength of his own testimony,
whatever he may assert (U.S. vs. Osgood 27 Feb. Case No. 15971-a, p. 364); Gonzales vs. Mauricio, 52 Phil, 728), for
what ground of judicial relief can there be left when the party has shown such gross insensibility to the difference between
right and wrong, between truth and falsehood? (The Santisima Trinidad, 7 Wheat, 283, 5 U.S. [L. ed.] 454).

True, that Choithram's testimony finds corroboration from the testimony of his brother, Navalrai, but the same would not be
of much help to Choithram. Not only is Navalrai an interested and biased witness, having admitted his close relationship
with Choithram and that whenever he or Choithram had problems, they ran to each other (tsn, pp. 17-18, S. Sept. 20, 1985),
Navalrai has a pecuniary interest in the success of Choithram in the case in question. Both he and Choithram are business
partners in Jethmal and Sons and/or Jethmal Industries, wherein he owns 60% of the company and Choithram, 40% (p. 62,
Appellant's Brief). Since the acquisition of the properties in question in 1966, Navalrai was occupying 1,200 square meters
thereof as a factory site plus the fact that his son (Navalrais) was occupying the apartment on top of the factory with his
family rent free except the amount of P l,000.00 a month to pay for taxes on said properties (tsn, p. 17, S. Oct. 3, 1985).

Inherent contradictions also marked Navalrai testimony. "While the latter was very meticulous in keeping a receipt for the P
10,000.00 that he paid Ishwar as settlement in Jethmal Industries, yet in the alleged payment of P 100,000.00 to Ishwar, no
receipt or voucher was ever issued by him (tsn, p. 17, S. Oct. 3, 1983).15

We concur.
The foregoing findings of facts of the Court of Appeals which are supported by the evidence is conclusive on this Court. The Court
finds that Ishwar entrusted US$150,000.00 to Choithram in 1965 for investment in the realty business. Soon thereafter, a general
power of attorney was executed by Ishwar in favor of both Navalrai and Choithram. If it is true that the purpose only is to enable
Choithram to purchase realty temporarily in the name of Ishwar, why the inclusion of their elder brother Navalrai as an attorney-in-
fact?

Then, acting as attorney-in-fact of Ishwar, Choithram purchased two parcels of land located in Barrio Ugong Pasig, Rizal, from Ortigas
in 1966. With the balance of the money of Ishwar, Choithram erected a building on said lot. Subsequently, with a loan obtained from
a bank and the income of the said property, Choithram constructed three other buildings thereon. He managed the business and
collected the rentals. Due to their relationship of confidence it was only in 1970 when Ishwar demanded for an accounting from
Choithram. And even as Ishwar revoked the general power of attorney on February 4, 1971, of which Choithram was duly notified,
Choithram wrote to Ishwar on June 25, 1971 requesting that he execute a new power of attorney in their favor. 16 When Ishwar did not
respond thereto, Choithram nevertheless proceeded as such attorney-in-fact to assign all the rights and interest of Ishwar to his
daughter-in-law Nirmla in 1973 without the knowledge and consent of Ishwar. Ortigas in turn executed the corresponding deeds of
sale in favor of Nirmla after full payment of the purchase accomplice of the lots.

In the prefatory statement of their petition, Choithram pictured Ishwar to be so motivated by greed and ungratefulness, who squandered
the family business in New York, who had to turn to his wife for support, accustomed to living in ostentation and who resorted to
blackmail in filing several criminal and civil suits against them. These statements find no support and should be stricken from the
records. Indeed, they are irrelevant to the proceeding.

Moreover, assuming Ishwar is of such a low character as Choithram proposes to make this Court to believe, why is it that of all
persons, under his temporary arrangement theory, Choithram opted to entrust the purchase of valuable real estate and built four
buildings thereon all in the name of Ishwar? Is it not an unconscious emergence of the truth that this otherwise wayward brother of
theirs was on the contrary able to raise enough capital through the generosity of his father-in-law for the purchase of the very properties
in question? As the appellate court aptly observed if truly this temporary arrangement story is the only motivation, why Ishwar of all
people? Why not the own son of Choithram, Haresh who is also an American citizen and who was already 18 years old at the time of
purchase in 1966? The Court agrees with the observation that this theory is an afterthought which surfaced only when Choithram,
Nirmla and Moti filed their answer.

When Ishwar asked for an accounting in 1970 and revoked the general power of attorney in 1971, Choithram had a total change of
heart. He decided to claim the property as his. He caused the transfer of the rights and interest of Ishwar to Nirmla. On his
representation, Ortigas executed the deeds of sale of the properties in favor of Nirmla. Choithram obviously surmised Ishwar cannot
stake a valid claim over the property by so doing.

Clearly, this transfer to Nirmla is fictitious and, as admitted by Choithram, was intended only to place the property in her name until
Choithram acquires Philippine citizenship.17 What appears certain is that it appears to be a scheme of Choithram to place the property
beyond the reach of Ishwar should he successfully claim the same. Thus, it must be struck down.

Worse still, on September 27, 1990 spouses Ishwar filed an urgent motion for the issuance of a writ of preliminary attachment and to
require Choithram, et al. to submit certain documents, inviting the attention of this Court to the following:

a) Donation by Choithram of his 2,500 shares of stock in General Garments Corporation in favor of his children on December
29, 1989;18

b) Sale on August 2, 1990 by Choithram of his 100 shares in Biflex (Phils.), Inc., in favor of his children; 19 and

c) Mortgage on June 20, 1989 by Nirmla through her attorney-in-fact, Choithram, of the properties subject of this litigation,
for the amount of $3 Million in favor of Overseas Holding, Co. Ltd., (Overseas for brevity), a corporation which appears to
be organized and existing under and by virtue of the laws of Cayman Islands, with a capital of only $100.00 divided into 100
shares of $1.00 each, and with address at P.O. Box 1790, Grand Cayman, Cayman Islands. 20

An opposition thereto was filed by Choithram, et al. but no documents were produced. A manifestation and reply to the opposition was
filed by spouses Ishwar.

All these acts of Choithram, et al. appear to be fraudulent attempts to remove these properties to the detriment of spouses Ishwar
should the latter prevail in this litigation.

On December 10, 1990 the court issued a resolution that substantially reads as follows:

Considering the allegations of petitioners Ishwar Jethmal Ramnani and Sonya Ramnani that respondents Choithram
Jethmal Ramnani, Nirmla Ramnani and Moti G. Ramnani have fraudulently executed a simulated mortgage of the properties
subject of this litigation dated June 20, 1989, in favor of Overseas Holding Co., Ltd. which appears to be a corporation
 organized in Cayman Islands, for the amount of $ 3,000,000.00, which is much more than the value of the properties in
litigation; that said alleged mortgagee appears to be a "shell" corporation with a capital of only $100.00; and that this alleged
transaction appears to be intended to defraud petitioners Ishwar and Sonya Jethmal Ramnani of any favorable judgment
that this Court may render in this case;

Wherefore the Court Resolved to issue a writ of preliminary injunction enjoining and prohibiting said respondents Choithram
Jethmal Ramnani, Nirmla V. Ramnani, Moti G. Ramnani and the Overseas Holding Co., Ltd. from encumbering, selling or
otherwise disposing of the properties and improvements subject of this litigation until further orders of the Court. Petitioners
Ishwar and Sonya Jethmal Ramnani are hereby required to post a bond of P 100,000.00 to answer for any damages d
respondents may suffer by way of this injunction if the Court finally decides the said petitioners are not entitled thereto.

The Overseas Holding Co., Ltd. with address at P.O. Box 1790 Grand Cayman, Cayman Islands, is hereby IMPLEADED
as a respondent in these cases, and is hereby required to SUBMIT its comment on the Urgent Motion for the Issuance of a
Writ of Preliminary Attachment and Motion for Production of Documents, the Manifestation and the Reply to the Opposition
filed by said petitioners, within Sixty (60) days after service by publication on it in accordance with the provisions of Section
17, Rule 14 of the Rules of Court, at the expense of petitioners Ishwar and Sonya Jethmal Ramnani.

Let copies of this resolution be served on the Register of Deeds of Pasig, Rizal, and the Provincial Assessor of Pasig, Rizal,
both in Metro Manila, for its annotation on the transfer Certificates of Titles Nos. 403150 and 403152 registered in the name
of respondent Nirmla V. Ramnani, and on the tax declarations of the said properties and its improvements subject of this
litigation.21

The required injunction bond in the amount of P 100,000.00 was filed by the spouses Ishwar which was approved by the Court. The
above resolution of the Court was published in the Manila Bulletin issue of December 17, 1990 at the expense of said spouses. 22 On
December 19, 1990 the said resolution and petition for review with annexes in G.R. Nos. 85494 and 85496 were transmitted to
respondent Overseas, Grand Cayman Islands at its address c/o Cayman Overseas Trust Co. Ltd., through the United Parcel Services
Bill of Lading23 and it was actually delivered to said company on January 23, 1991. 24

On January 22, 1991, Choithram, et al., filed a motion to dissolve the writ of preliminary injunction alleging that there is no basis
therefor as in the amended complaint what is sought is actual damages and not a reconveyance of the property, that there is no
reason for its issuance, and that acts already executed cannot be enjoined. They also offered to file a counterbond to dissolve the
writ.

A comment/opposition thereto was filed by spouses Ishwar that there is basis for the injunction as the alleged mortgage of the property
is simulated and the other donations of the shares of Choithram to his children are fraudulent schemes to negate any judgment the
Court may render for petitioners.

No comment or answer was filed by Overseas despite due notice, thus it is and must be considered to be in default and to have lost
the right to contest the representations of spouses Ishwar to declare the aforesaid alleged mortgage nun and void.

This purported mortgage of the subject properties in litigation appears to be fraudulent and simulated. The stated amount of $3 Million
for which it was mortgaged is much more than the value of the mortgaged properties and its improvements. The alleged mortgagee-
company (Overseas) was organized only on June 26,1989 but the mortgage was executed much earlier, on June 20, 1989, that is six
(6) days before Overseas was organized. Overseas is a "shelf" company worth only $100.00. 25 In the manifestation of spouses Ishwar
dated April 1, 1991, the Court was informed that this matter was brought to the attention of the Central Bank (CB) for investigation,
and that in a letter of March 20, 1991, the CB informed counsel for spouses Ishwar that said alleged foreign loan of Choithram, et al.
from Overseas has not been previously approved/registered with the CB. 26

Obviously, this is another ploy of Choithram, et al. to place these properties beyond the reach of spouses Ishwar should they obtain
a favorable judgment in this case. The Court finds and so declares that this alleged mortgage should be as it is hereby declared null
and void.

All these contemporaneous and subsequent acts of Choithram, et al., betray the weakness of their cause so they had to take an steps,
even as the case was already pending in Court, to render ineffective any judgment that may be rendered against them.

The problem is compounded in that respondent Ortigas is caught in the web of this bitter fight. It had all the time been dealing with
Choithram as attorney-in-fact of Ishwar. However, evidence had been adduced that notice in writing had been served not only on
Choithram, but also on Ortigas, of the revocation of Choithram's power of attorney by Ishwar's lawyer, on May 24, 1971. 27 A publication
of said notice was made in the April 2, 1971 issue of The Manila Times for the information of the general public.28 Such notice of
revocation in a newspaper of general circulation is sufficient warning to third persons including Ortigas.29 A notice of revocation was
also registered with the Securities and Exchange Commission on March 29, 1 971. 30

Indeed in the letter of Choithram to Ishwar of June 25, 1971, Choithram was pleading that Ishwar execute another power of attorney
to be shown to Ortigas who apparently learned of the revocation of Choithram's power of attorney.31 Despite said notices, Ortigas
nevertheless acceded to the representation of Choithram, as alleged attorney-in-fact of Ishwar, to assign the rights of petitioner Ishwar
to Nirmla. While the primary blame should be laid at the doorstep of Choithram, Ortigas is not entirely without fault. It should have
required Choithram to secure another power of attorney from Ishwar. For recklessly believing the pretension of Choithram that his
power of attorney was still good, it must, therefore, share in the latter's liability to Ishwar.

In the original complaint, the spouses Ishwar asked for a reconveyance of the properties and/or payment of its present value and
damages.32 In the amended complaint they asked, among others, for actual damages of not less than the present value of the real
properties in litigation, moral and exemplary damages, attorneys fees, costs of the suit and further prayed for "such other reliefs as
may be deemed just and equitable in the premises .33 The amended complaint contain the following positive allegations:

7. Defendant Choithram Ramnani, in evident bad faith and despite due notice of the revocation of the General Power of
Attorney, Annex 'D" hereof, caused the transfer of the rights over the said parcels of land to his daughter-in-law, defendant
Nirmla Ramnani in connivance with defendant Ortigas & Co., the latter having agreed to the said transfer despite receiving
a letter from plaintiffs' lawyer informing them of the said revocation; copy of the letter is hereto attached and made an integral
part hereof as Annex "H";

8. Defendant Nirmla Ramnani having acquired the aforesaid property by fraud is, by force of law, considered a trustee of
an implied trust for the benefit of plaintiff and is obliged to return the same to the latter:

9. Several efforts were made to settle the matter within the family but defendants (Choithram Ramnani, Nirmla Ramnani
and Moti Ramnani) refused and up to now fail and still refuse to cooperate and respond to the same; thus, the present case;

10. In addition to having been deprived of their rights over the properties (described in par. 3 hereof), plaintiffs, by reason
of defendants' fraudulent act, suffered actual damages by way of lost rental on the property which defendants (Choithram
Ramnani, Nirmla Ramnani and Moti Ramnani have collected for themselves; 34

In said amended complaint, spouses Ishwar, among others, pray for payment of actual damages in an amount no less than the value
of the properties in litigation instead of a reconveyance as sought in the original complaint. Apparently they opted not to insist on a
reconveyance as they are American citizens as alleged in the amended complaint.

The allegations of the amended complaint above reproduced clearly spelled out that the transfer of the property to Nirmla was
fraudulent and that it should be considered to be held in trust by Nirmla for spouses Ishwar. As above-discussed, this allegation is
well-taken and the transfer of the property to Nirmla should be considered to have created an implied trust by Nirmla as trustee of the
property for the benefit of spouses Ishwar.35

The motion to dissolve the writ of preliminary injunction filed by Choithram, et al. should be denied. Its issuance by this Court is proper
and warranted under the circumstances of the case. Under Section 3(c) Rule 58 of the Rules of Court, a writ of preliminary injunction
may be granted at any time after commencement of the action and before judgment when it is established:

(c) that the defendant is doing, threatens, or is about to do, or is procuring or suffering to be done, some act probably in
violation of plaintiffs's rights respecting the subject of the action, and tending to render the judgment ineffectual.

As above extensively discussed, Choithram, et al. have committed and threaten to commit further acts of disposition of the properties
in litigation as well as the other assets of Choithram, apparently designed to render ineffective any judgment the Court may render
favorable to spouses Ishwar.

The purpose of the provisional remedy of preliminary injunction is to preserve the status quo of the things subject of the litigation and
to protect the rights of the spouses Ishwar respecting the subject of the action during the pendency of the Suit 36 and not to obstruct
the administration of justice or prejudice the adverse party. 37 In this case for damages, should Choithram, et al. continue to commit
acts of disposition of the properties subject of the litigation, an award of damages to spouses Ishwar would thereby be rendered
ineffectual and meaningless.38

Consequently, if only to protect the interest of spouses Ishwar, the Court hereby finds and holds that the motion for the issuance of a
writ of preliminary attachment filed by spouses Ishwar should be granted covering the properties subject of this litigation.

Section 1, Rule 57 of the Rules of Court provides that at the commencement of an action or at any time thereafter, the plaintiff or any
proper party may have the property of the adverse party attached as security for the satisfaction of any judgment that may be
recovered, in, among others, the following cases:

(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon which
the action is brought, or in concealing or disposing of the property for the taking, detention or conversion of which the action
is brought;
 (e) In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his
creditors; . . .

Verily, the acts of Choithram, et al. of disposing the properties subject of the litigation disclose a scheme to defraud spouses Ishwar
so they may not be able to recover at all given a judgment in their favor, the requiring the issuance of the writ of attachment in this
instance.

Nevertheless, under the peculiar circumstances of this case and despite the fact that Choithram, et al., have committed acts which
demonstrate their bad faith and scheme to defraud spouses Ishwar and Sonya of their rightful share in the properties in litigation, the
Court cannot ignore the fact that Choithram must have been motivated by a strong conviction that as the industrial partner in the
acquisition of said assets he has as much claim to said properties as Ishwar, the capitalist partner in the joint venture.

The scenario is clear. Spouses Ishwar supplied the capital of $150,000.00 for the business.1âwphi1 They entrusted the money to
Choithram to invest in a profitable business venture in the Philippines. For this purpose they appointed Choithram as their attorney-
in-fact.

Choithram in turn decided to invest in the real estate business. He bought the two (2) parcels of land in question from Ortigas as
attorney-in-fact of Ishwar- Instead of paying for the lots in cash, he paid in installments and used the balance of the capital entrusted
to him, plus a loan, to build two buildings. Although the buildings were burned later, Choithram was able to build two other buildings
on the property. He rented them out and collected the rentals. Through the industry and genius of Choithram, Ishwar's property was
developed and improved into what it is now—a valuable asset worth millions of pesos. As of the last estimate in 1985, while the case
was pending before the trial court, the market value of the properties is no less than P22,304,000.00.39 It should be worth much more
today.

We have a situation where two brothers engaged in a business venture. One furnished the capital, the other contributed his industry
and talent. Justice and equity dictate that the two share equally the fruit of their joint investment and efforts. Perhaps this Solomonic
solution may pave the way towards their reconciliation. Both would stand to gain. No one would end up the loser. After all, blood is
thicker than water.

However, the Court cannot just close its eyes to the devious machinations and schemes that Choithram employed in attempting to
dispose of, if not dissipate, the properties to deprive spouses Ishwar of any possible means to recover any award the Court may grant
in their favor. Since Choithram, et al. acted with evident bad faith and malice, they should pay moral and exemplary damages as well
as attorney's fees to spouses Ishwar.

WHEREFORE, the petition in G.R. No. 85494 is DENIED, while the petition in G.R. No. 85496 is hereby given due course and
GRANTED. The judgment of the Court of Appeals dated October 18, 1988 is hereby modified as follows:

1. Dividing equally between respondents spouses Ishwar, on the one hand, and petitioner Choithram Ramnani, on the other, (in G.R.
No. 85494) the two parcels of land subject of this litigation, including all the improvements thereon, presently covered by transfer
Certificates of Title Nos. 403150 and 403152 of the Registry of Deeds, as well as the rental income of the property from 1967 to the
present.

2. Petitioner Choithram Jethmal Ramnani, Nirmla V. Ramnani, Moti C. Ramnani and respondent Ortigas and Company, Limited
Partnership (in G.R. No. 85496) are ordered solidarily to pay in cash the value of said one-half (1/2) share in the said land and
improvements pertaining to respondents spouses Ishwar and Sonya at their fair market value at the time of the satisfaction of this
judgment but in no case less than their value as appraised by the Asian Appraisal, Inc. in its Appraisal Report dated August 1985
(Exhibits T to T-14, inclusive).

3. Petitioners Choithram, Nirmla and Moti Ramnani and respondent Ortigas & Co., Ltd. Partnership shall also be jointly and severally
liable to pay to said respondents spouses Ishwar and Sonya Ramnani one-half (1/2) of the total rental income of said properties and
improvements from 1967 up to the date of satisfaction of the judgment to be computed as follows:

a. On Building C occupied by Eppie's Creation and Jethmal Industries from 1967 to 1973, inclusive, based on the 1967 to
1973 monthly rentals paid by Eppie's Creation;

b. Also on Building C above, occupied by Jethmal Industries and Lavine from 1974 to 1978, the rental incomes based on
then rates prevailing as shown under Exhibit "P"; and from 1979 to 1981, based on then prevailing rates as indicated under
Exhibit "Q";

c. On Building A occupied by Transworld Knitting Mills from 1972 to 1978, the rental incomes based upon then prevailing
rates shown under Exhibit "P", and from 1979 to 1981, based on prevailing rates per Exhibit "Q";
 d. On the two Bays Buildings occupied by Sigma-Mariwasa from 1972 to 1978, the rentals based on the Lease Contract,
Exhibit "P", and from 1979 to 1980, the rentals based on the Lease Contract, Exhibit "Q".

and thereafter commencing 1982, to account for and turn over the rental incomes paid or ought to be paid for the use and occupancy
of the properties and all improvements totalling 10,048 sq. m., based on the rate per square meter prevailing in 1981 as indicated
annually cumulative up to 1984. Then, commencing 1985 and up to the satisfaction of the judgment, rentals shall be computed at ten
percent (10%) annually of the fair market values of the properties as appraised by the Asian Appraisals, Inc. in August 1985. (Exhibits
T to T-14, inclusive.)

4. To determine the market value of the properties at the time of the satisfaction of this judgment and the total rental incomes thereof,
the trial court is hereby directed to hold a hearing with deliberate dispatch for this purpose only and to have the judgment immediately
executed after such determination.

5. Petitioners Choithram, Nirmla and Moti, all surnamed Ramnani, are also jointly and severally liable to pay respondents Ishwar and
Sonya Ramnani the amount of P500,000.00 as moral damages, P200,000.00 as exemplary damages and attorney's fees equal to
10% of the total award. to said respondents spouses.

6. The motion to dissolve the writ of preliminary injunction dated December 10, 1990 filed by petitioners Choithram, Nirmla and Moti,
all surnamed Ramnani, is hereby DENIED and the said injunction is hereby made permanent. Let a writ of attachment be issued and
levied against the properties and improvements subject of this litigation to secure the payment of the above awards to spouses Ishwar
and Sonya.

7. The mortgage constituted on the subject property dated June 20, 1989 by petitioners Choithram and Nirmla, both surnamed
Ramnani in favor of respondent Overseas Holding, Co. Ltd. (in G.R. No. 85496) for the amount of $3-M is hereby declared null and
void. The Register of Deeds of Pasig, Rizal, is directed to cancel the annotation of d mortgage on the titles of the properties in question.

8. Should respondent Ortigas Co., Ltd. Partnership pay the awards to Ishwar and Sonya Ramnani under this judgment, it shall be
entitled to reimbursement from petitioners Choithram, Nirmla and Moti, all surnamed Ramnani.

9. The above awards shag bear legal rate of interest of six percent (6%) per annum from the time this judgment becomes final until
they are fully paid by petitioners Choithram Ramnani, Nirmla V. Ramnani, Moti C. Ramnani and Ortigas, Co., Ltd. Partnership. Said
petitioners Choithram, et al. and respondent Ortigas shall also pay the costs.

SO ORDERED.

Article 1803 - Rule when Manner of Management not Agreed

1.

E. M. Bachrach, plaintiff and appellee vs. La Protectora et.al. defendants and appellants January 21, 1918

STREET, J.:

In the year 1913, the individuals named as defendants in this action formed a civil partnership, called "La Protectora," for the purpose
of engaging in the business of transporting passengers and freight at Laoag, Ilocos Norte. In order to provide the enterprise with
means of transportation, Marcelo Barba, acting as manager, came to Manila and upon June 23, 1913, negotiated the purchase of two
automobile trucks from the plaintiff, E. M. Bachrach, for the agree price of P16,500. He paid the sum of 3,000 in cash, and for the
balance executed promissory notes representing the deferred payments. These notes provided for the payment of interest from June
23, 1913, the date of the notes, at the rate of 10 per cent per annum. Provision was also made in the notes for the payment of 25 per
cent of the amount due if it should be necessary to place the notes in the hands of an attorney for collection. Three of these notes, for
the sum of P3,375 each, have been made the subject of the present action, and there are exhibited with the complaint in the cause.
One was signed by Marcelo Barba in the following manner:

P. P. La Protectora
By Marcelo Barba
Marcelo Barba.

The other two notes are signed in the same way with the word "By" omitted before the name of Marcelo Barba in the second line of
the signature. It is obvious that in thus signing the notes Marcelo Barba intended to bind both the partnership and himself. In the body
of the note the word "I" (yo) instead of "we" (nosotros) is used before the words "promise to pay" (prometemos) used in the printed
form. It is plain that the singular pronoun here has all the force of the plural.

As preliminary to the purchase of these trucks, the defendants Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and Modesto
Serrano, upon June 12, 1913, executed in due form a document in which they declared that they were members of the firm "La
Protectora" and that they had granted to its president full authority "in the name and representation of said partnership to contract for
the purchase of two automobiles" (en nombre y representacion de la mencionada sociedad contratante la compra de dos automoviles).
This document was apparently executed in obedience to the requirements of subsection 2 of article 1697 of the Civil Code, for the
purpose of evidencing the authority of Marcelo Barba to bind the partnership by the purchase. The document in question was delivered
by him to Bachrach at the time the automobiles were purchased.

From time to time after this purchase was made, Marcelo Barba purchased of the plaintiff various automobile effects and accessories
to be used in the business of "La Protectora." Upon May 21, 1914, the indebtedness resulting from these additional purchases
amounted to the sum of P2,916.57

In May, 1914, the plaintiff foreclosed a chattel mortgage which he had retained on the trucks in order to secure the purchase price.
The amount realized from this sale was P1,000. This was credited unpaid. To recover this balance, together with the sum due for
additional purchases, the present action was instituted in the Court of First Instance of the city of Manila, upon May 29, 1914, against
"La Protectora" and the five individuals Marcelo Barba, Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and Modesto Serrano. No
question has been made as to the propriety of impleading "La Protectora" as if it were a legal entity. At the hearing, judgment was
rendered against all of the defendants. From this judgment no appeal was taken in behalf either of "La Protectora" or Marcelo Barba;
and their liability is not here under consideration. The four individuals who signed the document to which reference has been made,
authorizing Barba to purchase the two trucks have, however, appealed and assigned errors. The question here to be determined is
whether or not these individuals are liable for the firm debts and if so to what extent.

The amount of indebtedness owing to the plaintiff is not in dispute, as the principal of the debt is agreed to be P7,037. Of this amount
it must now be assumed, in view of the finding of the trial court, from which no appeal has been taken by the plaintiff, that the unpaid
balance of the notes amounts to P4,121, while the remainder (P2,916) represents the amount due for automobile supplies and
accessories.

The business conducted under the name of "La Protectora" was evidently that of a civil partnership; and the liability of the partners to
this association must be determined under the provisions of the Civil Code. The authority of Marcelo Barba to bind the partnership, in
the purchase of the trucks, is fully established by the document executed by the four appellants upon June 12, 1913. The transaction
by which Barba secured these trucks was in conformity with the tenor of this document. The promissory notes constitute the obligation
exclusively of "La Protectora" and of Marcelo Barba; and they do not in any sense constitute an obligation directly binding on the four
appellants. Their liability is based on the fact that they are members of the civil partnership and as such are liable for its debts. It is
true that article 1698 of the Civil Code declares that a member of a civil partnership is not liable in solidum(solidariamente) with his
fellows for its entire indebtedness; but it results from this article, in connection with article 1137 of the Civil Code, that each is liable
with the others (mancomunadamente) for his aliquot part of such indebtedness. And so it has been held by this court. (Co-Pitco vs.
Yulo, 8 Phil. Rep., 544.)

The Court of First Instance seems to have founded its judgment against the appellants in part upon the idea that the document
executed by them constituted an authority for Marcelo Barba to bind them personally, as contemplated in the second clause of article
1698 of the Civil Code. That cause says that no member of the partnership can bind the others by a personal act if they have not
given him authority to do so. We think that the document referred to was intended merely as an authority to enable Barba to bind the
partnership and that the parties to that instrument did not intend thereby to confer upon Barba an authority to bind them personally. It
is obvious that the contract which Barba in fact executed in pursuance of that authority did not by its terms profess to bind the appellants
personally at all, but only the partnership and himself. It follows that the four appellants cannot be held to have been personally
obligated by that instrument; but, as we have already seen, their liability rests upon the general principles underlying partnership
liability.

As to so much of the indebtedness as is based upon the claim for automobile supplies and accessories, it is obvious that the document
of June 12, 1913, affords no authority for holding the appellants liable. Their liability upon this account is, however, no less obvious
than upon the debt incurred by the purchase of the trucks; and such liability is derived from the fact that the debt was lawfully incurred
in the prosecution of the partnership enterprise.

There is no proof in the record showing what the agreement, if any, was made with regard to the form of management. Under these
circumstances it is declared in article 1695 of the Civil Code that all the partners are considered agents of the partnership. Barba
therefore must be held to have had authority to incur these expenses. But in addition to this he is shown to have been in fact the
president or manager, and there can be no doubt that he had actual authority to incur this obligation.

From what has been said it results that the appellants are severally liable for their respective shares of the entire indebtedness found
to be due; and the Court of First Instance committed no error in giving judgment against them. The amount for which judgment should
be entered is P7,037, to which shall be added (1) interest at 10 per cent per annum from June 23, 1913, to be calculated upon the
sum of P4.121; (2) interest at 6 per cent per annum from July 21, 1915, to be calculated upon the sum of P2,961; (3) the further sum
of P1,030.25, this being the amount stipulated to be paid by way of attorney's fees. However, it should be noted that any property
pertaining to "La Protectora" should first be applied to this indebtedness pursuant to the judgment already entered in this case in the
court below; and each of the four appellants shall be liable only for the one-fifth part of the remainder unpaid.

Let judgment be entered accordingly, without any express finding of costs of this instance. So ordered.